Many older Americans have paid off their mortgages and are debt-free. They may think that having a good credit score is less important than it was when they were younger, but that is not true. Having good credit is necessary for senior citizens.
People often do not realize that nursing homes and assisted living facilities are not covered by Medicare. They require private payments from Social Security, pensions, savings, or family contributions. About 10 percent of senior citizens live in senior housing.
Seniors who want to live in nursing homes or assisted living need to fill out an application. One factor that facilities look at is seniors’ credit scores. Since individuals will be making payments, the facilities need to know that they are likely to pay their bills.
Assisted living facilities and nursing homes are expensive. They can easily cost $5,000 per month on average, and even more if seniors need around-the-clock access to nurses.
Most seniors do not have enough money to pay all of these costs out of their savings. That is why it is important to have a good credit score. That demonstrates to the facility that the person has managed debt, such as a mortgage, car loan, and credit cards, responsibly in the past. The rationale for looking at seniors’ credit scores is the same reason why landlords look at prospective tenants’ credit.
Seniors may find that their credit scores decreased as they got older. This can happen for several reasons.
One of the most common causes is fraud. Senior citizens can be victims of identity theft, which is why it is important to obtain a free credit report every year and check it for errors.
Seniors may also miss payments, particularly for medical bills. With bills covered in part by Medicare, private insurance, and savings, sometimes seniors do not realize that they still owe a balance. An unpaid medical bill can wind up on a person’s credit report.
A high credit utilization ratio can also lower a person’s credit score. Closing accounts that are not used can reduce the amount of available credit.
Inactivity does not hurt a credit score, but a credit card company can close an account if it is not used for a period of time. That can affect the credit utilization ratio and the length of the person’s credit history.
Seniors who need to improve their credit scores can do so without going into debt. The easiest way to improve a credit score is to use a credit card and then pay the balance in full every month.