Why credit cards shouldn’t retire with you
When her car trouble began, Beverly Dobratz, 70, assumed that years of responsible credit usage would qualify her for a new car loan with a low interest rate.
Then the salesman checked her credit and learned that she hadn’t made any purchases with it in 10 years; she preferred to pay with cash or her debit card. That had hurt her credit scores, preventing her from getting a deal that worked for her.
“It was quite a shock. I had a huge down payment for him, but it didn’t make any difference,” the Long Beach, Calif., resident says. “I didn’t get the car.”
About one-third of American baby boomers risk damaging their credit scores in retirement by reducing or eliminating their use of credit cards, according to a survey by TransUnion, one of the three major credit bureaus that gather information used to calculate the scores. (TransUnion is a NerdWallet business partner.)
Using credit cards for small purchases keeps your credit active, says Heather Battison, a vice president at TransUnion. That can help ensure you’ll have available credit — or good credit scores — when it counts.
That’s why it’s important to maintain a strong credit profile even if you don’t foresee borrowing money again.
TransUnion consumer data show that 20 percent of people ages 51 and 70 have subprime credit, or a score of less than 600.
“You never know when you're going to need something,” Dobratz says. “Hang on to that credit.”