Credit is an integral part of lives today, so much so that it continues to be important in the twilight years of one’s life too! Just like being careful about credit health is important in the prime years, it is equally important that one follows some basic rules when they are in the later part of their life too. So what are the common credit mistakes that older people are likely to make and why should these mistakes be avoided?
1. Staying Away from Credit :
A lot of senior citizens may belong to the old school of thought where no credit is considered a good thing but this is not the case anymore. Senior citizens may avoid using credit cards even if they have one due to a mental block against credit cards or because they may find it cumbersome to use it. Senior citizens may also assume that they are not likely to require credit at this stage in life because they may already have a house that is paid for and a car that is debt free. However, life can be unpredictable and they may require a car loan because they need a new car or may have to take a personal loan to take care of medical or some other emergency. They may want to get a credit card issued because they might want to visit overseas and they might find getting a credit card issued or loan approved because they do not have any credit history.
2. Guaranteeing a Loan:
There may be times when elders may not need funds for themselves but they may guarantee a loan for a younger loved one without being fully aware of the implications. A grandchild may need an education loan or the child may need a loan for buying a house and there may be times applicant may find it difficult to get a loan on their own. In such a scenario they may approach the parent or the grand parent to guarantee a loan. While helping out your loved ones is perfectly fine but the elders need to keep in mind the fact that the guaranteed loan will become linked to their credit history. If the borrower does not pay on time the guarantor along with the borrower will be put on the loan defaulters list. Thus before guaranteeing a loan check your own finances and also ensure that the borrower has the capacity to repay the loan.
3. Failing to Check your Credit Score:
Senior citizens may assume that at this stage in their life they have no need to worry about the credit score as they will not need any more credit. There may be instances when they may simply not be aware of the importance of the credit rating since it has acquired so much importance only in the last decade or so. Owning to these two reasons they may fail to check their credit report from time to time as is recommended. Thus if they ever feel the need to access the credit they could be denied a loan or a credit card because their scores may be a loan or they may have no credit trail. Thus like everyone elders should also regularly go through their CIBIL Report and work on their scores if required.
4. Being Overburdened with Loan:
Being overburdened with debt will be harmful at any stage in life but it can be especially so for senior citizens. At any other stage in life, the likelihood of the borrower’s earning increasing with time and he/she being able to manage the debt burden is better than when someone is at a later stage in life. It is likely that elders will be retired so they would be relying on their savings for their day to day expenditure. Thus it is important the not only should they endeavor to pay off all debt before they retire but also ensure that they acquire fresh debt only after careful thought and planning.
So be smart and avoid any of the above mistakes to stay credit healthy always whether you are young or old!