Credit may not be at the top of the list when it comes to retirement, but good credit can make a big difference for retirees. This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article looking at some key factors that lenders consider:
As you plan for retirement, you might not give credit a second thought, especially if your plan includes paying off your mortgage and other debts, and relying more on cash than credit. But retirement could last many years, and your need for credit doesn’t necessarily disappear on your last day of work.
At some point you may want to buy a second home, move to a retirement community, take out a home equity loan, or buy a vehicle; it’s also possible you will face an unexpected expense.
Keeping your credit healthy may help you qualify for a lower interest rate or better terms on a loan or credit card, or if a credit check is involved, even help you land a part-time job or obtain a better deal on auto insurance.
When it comes to getting credit, it’s not growing older that matters — lenders can’t deny a credit application based solely on age. The factors that affect your ability to get credit are the same as for younger people and include your debt-to-income ratio (DTI) and your credit score.
Lenders use your DTI to measure your ability to repay money you borrow. This ratio is calculated by totaling your monthly debt payments then dividing that figure by your gross monthly income. For example, if your retirement income totals $6,000 and your debt payments total $2,000, your DTI is 33%. What’s considered a good DTI will vary, depending on…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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