Seniors are getting squeezed in so many ways. Healthcare and other basic expenses are rising. Fewer have pensions to supplement their Social Security income in retirement. Low interest rates mean what savings they do have isn’t growing quickly — unless they are willing to invest in higher-risk financial products.
And then there’s the other side of the equation: credit. Debt, credit report mistakes and identity theft can quickly bring down credit scores older Americans have carefully built over several decades. Here are five major credit mistakes older Americans make, and what to do about them.
1. Using Too Much Credit
Older Americans are increasingly struggling with debt. One study, the Demos’ 2012 National Survey on Credit Card Debt of Low- and Middle-Income Households found that Americans age 50+ have an average combined balance of $8,278 on all of their credit cards cards in 2012, compared with $6,258 of those under age 50. [...]
Some of this debt is unavoidable. After all, the Demos researchers found that more than one-third of those over 50 who are carrying credit card debt are using those cards to pay for living expenses. [...]
3. Cosigning
A grandson who just graduated from college wants to get his first car, but doesn’t have a credit history. A daughter has gone through a divorce and asks her parents to cosign for an apartment. A child or grandchild wants to start a business but can’t get a small business loan. Whatever the circumstances, older Americans may find themselves agreeing to lend their name and credit to someone else’s loan. But they don’t always realize the risk they are taking when they do.
In the Demos survey, nearly a quarter of age 50 or older reported that some of their credit card debt was due to giving money to, or paying the debts of, relatives.
If someone cosigns and the primary borrower doesn’t pay on time, any late payments that are reported will also appear on the cosigner’s credit histories as well.
