Elder Law

Getting Credit After 62

Getting credit after you have retired from work may be more difficult than you expect even if you have an excellent credit score. The reason for this may be that your income is lower than it was when you were working or it may be that you do not have a sufficient credit history to get credit. You may need to spend extra time to find viable options but you should be able to get credit at a reasonable interest rate during your retirement.

Your Credit Score

Your credit score is based on information in your credit report and is something that you will want to know if you plan of getting credit. It is a number, usually between 300 and 850, that is used by creditors to decide whether to give you credit and at what interest rate. The higher your credit score, the better your credit rating. You are more likely to get credit and to get it with a lower interest rate if you have a high credit score since credit scores are used by lenders to predict if you'll pay off your loans and whether you'll pay on time. Knowing your credit score and understanding what determines it can help you get credit.

Before you borrow money, find out what score your lender will use since there are many different ones. A common score used by lenders is the FICO score. You can get yours at the myfico.com Web site but there is a charge to get it.

Credit scores and credit reports are different. Your credit score gives you a number score from 300 to 850. When you buy your score, you get an explanation of what the score means and the reasons your score was not higher. Your credit report has specific information credit bureaus, also called consumer reporting companies, collect from your creditors.

Your Credit Report

Before you apply for credit, check your credit history be getting your credit report from the top three credit bureaus so you know where you stand. You are entitled to one free credit report a year, which you can get at the AnnualCreditReport.com Web site. You may also contact the three major bureaus by going to their individual Web sites or calling their toll free telephone numbers:

If your satisfied with the information in your file at each the three major bureaus then it is time to do some research to select the best credit for you.

Stricter Lending Procedures

If your credit scores and history at the three bureaus looks good, it's time to shop around for credit but remember that credit limits have recently been reduced for everyone, not just people who are retired. Banks and credit lenders have taken a stricter approach with their lending procedures. One major credit problem for retired people could be that when they reach retirement their income becomes significantly reduced but they still need to make the same rate of payment on credit cards. With the credit crackdown by banks and lenders, many retired people have found their credit limits lowered.

Credit Cards

You don't want to necessarily take the first credit card you are offered. There are plenty of lenders that charge exorbitant interest rates and take advantage of people who need but are finding it hard to receive credit. Always read the terms and conditions of any agreement before signing and always shop around for the best deal before signing any agreement.

Don't apply for a credit card until you have found the right one for you. Every time you apply for a credit card, a note will be left on your credit file even if you are refused the credit. Lenders will view this file when you apply to them, and too many notes will look like you have either been applying for credit many times or that you are over committing yourself financially.

When choosing your credit card issuer, beware of special offers. If you get a credit card offer in the mail that advertises an unbelievably low interest rate, don't believe it. Check the fine print. The interest rate will probably rise in the coming months. Shop for the best deal. Look for a card that has a low annual fee and interest rate. Make sure that you'll owe no interest as long as you pay your monthly bill in full and on time. Think twice before purchasing insurance that promises to pay your credit card bills if you can't. Often, this insurance is not worth the money it will cost you.

Types of Credit Cards

There are several types of credit cards that you can consider, including:

  • Low Interest Rate Credit Cards
  • Bank Credit Cards
  • Prepaid Credit Cards

You may want to shop around for the lowest interest rate credit card that doesn't charge an annual fee. Banks usually look more favorably on existing customers with good repayment records. Another option, is a prepaid credit card. This may be a good option for you if you are unable to get a low interest or bank credit card. A prepaid credit card is used in the same manner as credit cards except you need to put your own money into the card before you can use it. The benefits are that there is no interest on the cards, you can keep an eye on how much you are spending and you cannot go over your limit. Some prepaid credit card companies do charge a fee to set them up but if you shop around there are cards that have no fees.


If you need a loan, you can start by asking local banks, credit unions or mortgage companies. Whether you borrow for home repairs, medical expenses or to consolidate your debt into a single monthly payment, compare the total costs of the loan as well as interest rates. There are secured and unsecured loans.

An unsecured loan is when you borrow money that is not secured by any of your assets. A secured loan is when you borrow money and pledge an asset, such as your house or car, as collateral for the loan. If you fail to pay, the lender can take the asset.

A home equity loan is a common type of secured loan. Although home equity loans are an easy and tax-deductible way to use your house as a source of cash, they are not a good idea unless you are certain that you can make the payments. If you don't pay back the loan, you can lose your house.

There are two types of home equity loans: term loans and line of credit loans. Bankers often refer to them as second mortgages because, just like your first mortgage, your house secures the loan.

Avoid loans with "balloon"payments. They may sound good because your initial monthly payments are small but they require a big balloon payment at the end of the loan period. You may even end up owing more money than your house is worth.

A home equity line of credit may be preferable over a home equity loan because you will pay interest on your entire outstanding balance on a loan but with a line of credit you do not pay any interest until you actually take some money out, and then only on the amount you withdraw. However, many homeowners who have taken out home equity lines of credit have learned in recent months that their loans are not as useful as they initially seemed because lenders are cutting back on homeowners' credit lines or freezing them altogether to minimize their risk.

Reverse Mortgage

If you are 62 or older, a reverse mortgage may be better than getting a home equity loan. A reverse mortgage, which is based on the equity you have built up in the house over time, gives you money that you don't have to repay until you move, sell the house or die. You can choose to get the money as a lump sum payment, as monthly income or a combination of both. If you get a reverse mortgage, you can't lose your house to foreclosure the way you could with a home equity loan. For more information see the AARP.org Web site.

Law on Your Side

The Equal Credit Opportunity Act (ECOA) ensures that all consumers are given an equal chance to obtain credit. It's against the law for a creditor to deny you credit or terminate existing credit simply because of your age. The ECOA doesn't guarantee you'll get credit. But if you're denied credit, you have the right to know why. For more information see the Federal Trade Commission - Equal Credit Opportunity Web site.

Questions for Your Attorney

Some of the questions that you my want to ask your attorney are:

  • I have been denied credit by several banks and credit card companies, how do I know if they are discriminating against me because of my age?
  • What do I need to do to get incorrect information removed from my credit files?
  • What are some of the steps I can take to improve my credit score?
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