Why Credit Scores Can Suffer in Retirement — and 5 Ways to Help Protect Them

After years of working and saving, retirement often brings big shifts to a household budget. One possible result is a lower credit score.

Retirement itself does not lower a credit score. Instead, changes in your finances — such as whether you still carry a mortgage or have an auto loan — can affect it, and those details often look different once you stop working.

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Why a credit score may fall in retirement

When a mortgage, car loan or other installment loan is paid off, a credit score can slip. That is because paying off debt can change your credit mix, which is the variety of credit accounts listed under your name. Closing older credit cards as part of simplifying finances can also hurt a score because it can shorten or weaken your credit history.

Retirees with a smaller income may also rely more heavily on credit cards while waiting for Social Security or other income to arrive. That can push up credit utilization, and a higher utilization rate can drag a score down.

5 ways to stop the bleeding

There are steps you can take that may help support your credit score.

What not to worry about — and when to move quickly

A modest decline in a credit score is not necessarily a reason to worry, especially if you do not plan to borrow, refinance, relocate, buy a car or apply for new credit in the near future. Even so, lenders, landlords, utility companies and, in some states, insurers may review your credit, so it is wise to keep it in good shape.

It is also important to understand why the score is falling. For example, a drop caused by paying off a mortgage is not usually alarming. But a decline tied to late payments and a large credit card balance is more serious, because it may point to a continuing problem. In that case, improving the score means paying bills on time and working down credit card debt. The same is true if identity theft is allowing someone else to take out loans in your name.