Credit scoring in retirement

Whether you're taking out a credit card, personal loan, a mobile phone contract or changing utility providers, the chances are your credit score will be looked at first. So if you've ever wondered what your credit score is, read on to find out how it can still affect your daily life, now that you're a little bit older.

What is a credit score?

It's a rating, a number that's assigned to you theoretically, based on your credit history. It's used as a benchmark by companies and organisations to work out if you're a financial risk to them. The higher you score, the less risk you present.

What affects my credit score?

The following factors can have an influence on the way your credit score is calculated:

  • Your payment history – if you have made late payments on credit cards or loans, this will lower your score.
  • Your public records – it will affect your rating if you’ve been bankrupted or have had judgements against you.
  • Owing too much – if you’re approaching your total credit limit then you could be refused more.
  • Length of your credit history – in general, a longer credit history is better.
  • Lots of new accounts – if you’ve opened several new accounts in a short space of time, it could lower your credit rating. 
  • Open credit cards – if you’re not using those credit cards, close those accounts.
  • A large number of searches – when someone else like a landlord, lender or insurer gets your credit report, it’s recorded. Lots of searches can mean a lower credit rating. 

Why is it important to have a good credit score?

Many of us have to live on a fixed income in retirement, but it's possible there will be times when you may wish to buy things on 'credit' to help you budget more easily. That's where a good credit score can really come in handy. Also, it can help you obtain better deals – for example, if you wish to change to a cheaper energy supplier, a credit score is sometimes required.

How can I make sure I keep up a good credit score?  

As you get older, it’s important to stay on top of your incomings and outgoings. A missed bill payment could be a simple slip of the mind, but it could affect your credit rating.

To keep on top of the bills, set up Direct Debits so regular payments automatically go out of your account each month. Don’t worry, this won’t mean you end up paying for something you haven’t used or bought, and you’ll be covered by the Direct Debit Guarantee. But if debt does begin to trouble you, you can find out what to do about debt, here.

Is there anything else I should know about credit scoring in retirement?

Ironically, it’s worth bearing in mind that some people score badly precisely because they’ve built up a history of not borrowing money – and therefore not able to prove that they can pay it back.

However, you can find out what your credit score is relatively easily by going online and using one of the three main credit reference agencies services – Experian, CallCredit or Equifax. It’s your legal right to be able to see a copy of your credit report for free.

Do bear in mind though, that those agencies' views on your credit score are only part of a lender's decision to lend you money – and those views may vary, depending on which agency you use. But if you're not sure your score is high enough, it's well worth doing this in advance of making a credit application. Every application you make could leave a 'footprint' on your credit history and too many applications being turned down can have a negative effect on your credit rating overall.