Nearing retirement age and not too bothered about your credit score? Here's why you should be.
An increasing number of Australians are planning to work past the age of 65, highlighting the need for financial security during your retirement years. Figures released in April 2016 by the Australian Bureau of Statistics showed 71% of Australians over the age of 45 intended to work past the age of 65, which was up from 66% in the previous years' survey.
Many Australians take out personal loans and credit cards during their retirement years, and if you're planning on doing so as well you'll need to maintain your credit score.
What is my credit score?
Your credit score is a number calculated by credit reporting bureaus that hold your credit report. Here is how the two credit reporting bodies Experian and Equifax calculate credit scores:
|Fair / Average||550-624||510-621|
|Weak / Below average||0-549||0-509|
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How is my credit score calculated?
It is calculated using the details listed on your credit file. This includes:
- Personal information. Your age, the length of time you've been employed and time you've been at your current address can affect your credit score.
- Consumer credit information. Any lender you apply for or are approved for credit with can affect your credit score. This includes the type of lender it is, how much you're approved for and how many applications you make.
- Details of directorships and proprietorships. If you are a director or proprietor your credit score can be influenced by the commercial section of your credit file.
- Negative credit listings. Any details of overdue debts, defaults, missed or late payments or serious credit infringements will have a negative impact on your credit score.
- The age of your credit report. The listings on your credit file will have a different effect depending on the age of your credit file. For instance, if you make a number of applications for credit and your credit score has only been active a short time, it may have a larger impact on your credit score than if your credit file had been active for a number of years.
Why is my credit score important during retirement?
Your credit score is important during every life stage, but especially your later years.
- To support children. In today's property market, helping children get onto the property ladder or supporting them financially in later years has become more common. This has made it harder for those reaching retirement age to plan for their own pension funds. By keeping a clean credit score you can make sure you'll be able to access finance should you need it – whether it be for you or your children – before and after you retire.
- To invest in property. If you pay off the mortgage for your primary residence before you retire, using the equity to invest in a property during retirement can provide additional income. However, you'll need a good credit score to even consider this strategy. If you're nearing retirement age and want to clean up your credit file, there are ways you can improve your credit record.
- To be eligible for credit cards and personal loans. If you're a self-funded retiree or relying on pension benefits, you may still like the convenience of a credit card to help pay for unexpected purchases. Similarly, a lump-sum personal loan or line of credit loan may also suit your retirement lifestyle. There are banks and lenders that may consider you, but it's important to compare your options before you apply.
Just like working hard to save before you retire, a good credit score can help support you during your retirement years. The first step comes from finding out where you stand with your credit today.