4 Reasons Why Retirees Should Still Be Checking Their Credit Report

Keep an eye out for errors, unpaid bills and other issues

Cheryl Winokur Munk

Comments

Published October 21, 2024

Rob Dobi

Many retirees think they no longer need to keep tabs on their credit report, especially if they’ve already paid off their mortgage and don’t plan on taking out another home loan.

But there are good reasons to remain vigilant about checking your credit report. These include the potential for errors or fraud, both which can wreak havoc on the credit profile you’ve worked hard to build over the years.

Staying on top of your credit report can also make it easier to act if you decide, at a later time, to apply for an auto loan or a new credit card. At that point, a previously undiscovered problem could cause delays or issues in obtaining credit, or require greater damage control.

Checking your credit report is easy to do. Reports are available for free on a weekly basis from the three major credit bureaus — Equifax, Experian and TransUnion — at AnnualCreditReport.com.

“Regardless of your age, you should never stop keeping your eyes on your credit report,” says credit expert John Ulzheimer, who previously held positions at FICO, Equifax and Credit.com.

Here are four crucial reasons to check your credit report on an ongoing basis, even in your later years.

1. Because errors can occur

There may be small errors on your credit report, such as an incorrect address or phone number, that can be easily fixed and won’t harm your ability to seek credit. But more problematic errors can also occur, such as if another similarly named or identically named person’s missed credit card payments appear on your report. If you do find an error, you’re not alone; a survey from Consumer Reports and the nonprofit WorkMoney found 44 percent of respondents who checked their credit reports found at least one error.

If you spot an error on your credit report, you should report the mistake to the appropriate credit bureau. Explain, in writing, why it’s incorrect and provide supporting documentation.

Ulzheimer recommends seniors continue to check their reports every few months even if they’ve placed security freezes and fraud alerts with the major credit bureaus. While these measures can help protect against fraud, they can’t entirely prevent errors from occurring, since lenders and creditors can still report incorrect information to the credit bureaus or other mistakes can occur.

How to Track Your Credit Score

Your credit report doesn’t include your credit score, the all-powerful, three-digit number that lenders and creditors use to assess your creditworthiness. But there are a number of ways you can keep an eye on your credit score — some at no cost.

Many major credit card issuers, including American Express, Bank of America, Capital One, Citi and Chase, provide free credit scores to customers and, in some cases, to anyone who enrolls in their credit score monitoring service. You can get an updated score once a month, or more frequently, depending on the issuer.

The major credit bureaus also offer the ability to track your credit score, sometimes for free, though often there’s a fee involved. There are other paid services that may come with additional benefits, such as identity-theft monitoring, but be sure to read the fine print to understand the services you're getting.

Be aware that your credit score can vary, depending on whether the card issuer uses VantageScore or FICO. Both provide a score ranging from 300 to 850, but they use different formulas. FICO scores can also differ from one issuer to another depending on which consumer credit bureau is being used. Each of the three major bureaus collects consumer account data independently and calculates scores based on that data.

Don’t feel compelled to check it daily or even weekly, if offered. But, regular monthly monitoring is advisable to ensure nothing falls through the cracks, financial professionals say. “You don’t want to see you’re an 810 one month and a 570 the next month,” Ulzheimer says.

2. Because you may have unpaid bills

Even if you generally pay your bills on time, you may make an honest mistake if, for instance, a bill got lost in the mail or got accidentally misplaced and a payment was never made as a result. And if you aren’t checking your credit report regularly, a small mix-up could cause interest to spiral, leaving you with a hefty bill. In 2022, Americans paid $130 billion in interest and fees on their credit cards, according to the Consumer Financial Protection Bureau.

It’s easy to forget about a small balance on a credit card, especially if the card is rarely used, says Rod Griffin, senior director of public education and advocacy at Experian. But with credit card interest rates hovering around 20 percent, even a small missed payment can damage your credit, especially if it goes to collections, Griffin says. If you’re delinquent about paying, creditors generally start by sending letters and making collection calls. If you remain delinquent, lenders may send your defaulted debt to a collection agency to try to recoup the funds.

Medical bills can also go unpaid, either because people miss a bill or because they simply can’t afford the debt. The good news: the federal Consumer Financial Protection Bureau (CFPB) has proposed a rule that would remove medical bills from most credit reports. This follows a 2022 effort by the three largest credit bureaus to remove paid medical debts from consumers’ credit reports.

“Despite these voluntary industry changes, 15 million Americans still have $49 billion in outstanding medical bills in collections appearing in the credit reporting system,” according to a CFPB statement on June 11, 2024.

3. Because fraudsters often prey on older adults

Another reason for seniors to stay on top of their credit report is the possibility of fraud. Although people of any age group can be targeted by scammers, older individuals tend to be more vulnerable and often lose more money to fraud as they age.

People ages 60 and over reported more than $3.4 billion in fraud-related fraud crimes to the Federal Bureau of Investigation in 2023. That’s up about 11 percent from 2022, with the average victim of elder fraud losing $33,915 last year through these crimes. But because fraud is known to be a dramatically underreported crime, the true cost is likely far higher.

Checking your credit regularly can help you ensure bad actors aren’t using your personal information to open fraudulent accounts.

“It’s very important that seniors pay attention to their credit reports, because there are (fraudsters) out there trying to get their information on a constant basis,” says David Schneider, a certified financial planner at Schneider Wealth Strategies in New York.

Anita Resch, senior vice president and northeast regional manager in the Green Bay, Wisconsin office of wealth management firm Johnson Financial Group, routinely encourages clients to check their credit report. When one couple in their eighties checked their credit reports, they discovered that someone had been opening new credit cards in their names, Resch says. Luckily, they caught the error early, but the couple still had to freeze their credit, notify their financial institutions and the credit bureaus, and stop all automatic payments and transfers until they could determine what personal information the fraudsters had obtained. Had they not spotted the fraud early, it could have become significantly more difficult to address, Resch says. “You don’t want somebody destroying the credit you’ve created,” she explains. “Once they assume your identity, there’s a lot people can do.”

These issues aren’t limited to strangers. Fraud committed by family members is also a problem for seniors. Notably, in cases where victims knew the alleged suspect, nearly two-thirds involved a relative or known person, according to a 2019 CFPB review.

4. Because you might need to access credit in the future

There are a number of reasons seniors may need a strong credit score later in life, and monitoring their credit report can help them identify areas for improvement.

You might decide to sell your house and rent an apartment instead. You might want to co-sign a loan for a child or grandchild, or want to take advantage of rewards points or cash back by opening a credit card at a store they frequent. You could also be in the market for insurance, and carriers take credit into account for rates. Or you might want to take out a home equity line of credit (HELOC) to fund home improvements, in which case you’d likely need a credit score of 620 or higher to get approved.

Bottom line: keep an eye on your credit report so that your credit profile stays in good standing in your later years.

%{postComment}%