Does Your Credit Score Matter Once You're Retired?

For most of your adult life, your credit score is important. It's a measure of how likely you are to repay the money you borrow. So any time you borrow money, the lender will check your credit score and use that to set your interest rate.

Once you're retired, you may start wondering if your credit score still matters. Maybe you already have your home paid off, or you have a mortgage with a fixed rate, and you don't plan to borrow money anymore. And if you already have quality credit cards you like, you might figure you won't be applying for any new ones.

To be honest, in this situation, your credit score isn't as important. But that doesn't mean you should neglect it.

Your credit score still matters after you've retired

There are many ways your credit score affects your life, and they don't all involve borrowing money. That's why your credit score can still help or hurt you, even if you're retired and not planning to apply for any more loans or credit cards.

For example, in all but four states, car insurance companies use credit scores when setting rates. It's not a minor factor, either. Drivers with excellent credit paid an average of $1,947 in annual premiums in 2023, according to research on how credit scores impact car insurance by The Motley Fool Ascent. Drivers with poor credit paid an average of $4,145 -- a whopping $2,198 more.

If you drive, you should take care of your credit score. And that's not all. Here are a few other situations where your credit score will come into play:

• Setting up utility services: Utility companies usually run a credit check on new customers. If you don't have a high credit score, you could be required to pay a security deposit to set up electricity, gas, or water service.
• Getting phone, cable, and internet service: These companies also normally run a credit check and require a security deposit if your score isn't high enough.
• Renting a home: If you need to move at any point, many landlords run a credit check on rental applicants.

And even if you don't plan to apply for a loan or credit card again, it's better not to close that door entirely. Your car could break down, and the best way to buy a new one is an auto loan. Or you might find out about a grocery credit card that will earn you lots of cash back on your supermarket spending. If you maintain a high credit score, you'll likely be able to get approved for credit if you ever need it or want it.

Also, if you already have credit cards you like, keep in mind that these can be canceled if your credit score drops too much. Card issuers monitor their cardholders' credit scores. If your score drops, you're considered a greater risk. A card issuer could decide to cancel your card for that reason.

It's easy to maintain your credit score when you retire

Some aspects of managing your finances get more complicated when you retire. Fortunately, maintaining your credit score isn't one of them.

The key ingredient in your credit score is your payment history. When you pay on time, it's good for your credit. The longer you do this, the more it builds a positive payment history. If you've been using credit for decades and have consistently paid on time, you're in an excellent position. All you have to do is continue paying on time, and you shouldn't have any issues with your credit score.

A few other factors go into your credit score, but they're not weighed as heavily as your payment history. The only other factor with a large impact is your amounts owed, meaning the amounts you owe on credit cards and loans. As long as you don't owe too much on your credit cards, this won't be a problem.

While you don't need a high credit score when you retire, it's the safest option. And the habits that will help you maintain your credit, namely paying on time and not borrowing too much, are good financial habits regardless.