do credit scores (still) matter?

Your home’s mortgage is nearly paid off, and student loans are likely to be of the long-ago past. Besides that, you have a healthy nest egg for unanticipated expenses.

With all this, is it still important to keep an eye on your credit score? It could be.

A credit score is a figure used to predict the likeliness of a person’s ability to pay his or her debts, along with the estimated amount of credit the individual should shoulder. The number is derived through an assessment of an individual’s history of debt repayment, per the person’s credit report, with the results then applied to a statistical program. The resulting figure – a person’s credit score – often is used by lenders to determine whether an applicant is liable to make full and timely payments on money borrowed.

Different lenders often have their own standards for what is considered a strong score, however, 700 or higher is deemed a good score on a scale of 200 to 850. A person with a score of 649 or below may experience trouble securing credit. Being in the fair range of 650 to 699 can significantly increase one’s creditworthiness.

While individual credit scores can shift over time, potentially affecting one’s credit standing, if a person no longer has any loan payments and doesn’t intend to borrow a substantial amount of money in the foreseeable future, why would that person’s credit score still matter?

Consider that according to a February 2017 survey from TransUnion, one of the nation’s three largest credit bureaus, baby boomers viewed credit as a low priority, with just 16 percent of the survey’s respondents saying that maintaining healthy credit is a top financial priority when preparing for retirement. In fact, in a 2016 survey, TransUnion found that the same population felt their credit score was less important after age 70.

But there are several reasons why a solid credit rating matters, even for people without substantial loans.

A high credit rating can secure a person’s eligibility for prime credit cards: those with the lowest interest rate and best terms, including rewards packages, like travel and cash-back bonuses. Likewise, should a sudden need for a loan arise, having a good or better credit rating opens the way to get it at a prime rate.

Another benefit of maintaining a high credit score is how it can translate into savings on insurance rates, including those for home, life and auto. And a good credit score can come in handy when you’re ready to lease or buy your next car.

There also are mortgage and refinance pluses to having a robust (over 700) credit score. People that uphold their credit and want to downsize their home through a mortgaged purchase of a smaller property will realize lower rates for the loan, as will those who want to stay put but refinance the remainder of their current mortgage.

Remember, maintaining an ongoing credit history is key to sustaining a strong credit rating. So, charge that special meal out and put that flight to Florida on your credit card. Just be sure to make those outstanding payments on time.

CREDIT SCORE TIPS
(Source: The Better Business Bureau, www.bbb.org/sdoc/news-events/news-releases/2015/tips-to-maintain-a-healthy-credit-score/)

  • Pay your bills on time.
  • Maintain a low credit card balance by keeping it within 30 percent of your credit limit.
  • Limit your outstanding financial obligations.
  • Don’t close old credit cards since credit bureaus eventually remove a closed account’s history from your credit report, which could lower your credit score.
  • Watch your credit report, including tracking issued checks, credit card transactions, and ATM card usage. Review your monthly statements and report any possible discrepancies immediately, including those related to identity theft and credit card fraud.

Carol Schmitz

Carol Schmitz is the Senior Vice President, Community Banking, at Tompkins Mahopac Bank, which provides a broad range of services for consumers and businesses in Westchester, Putnam and Dutchess counties, www.mahopacbank.com; www.linkedin.com/in/carol-schmitz-b8b61379/

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