A recent University study found that elderly people are more likely than any other age group to file for bankruptcy. The “boomer generation,” now thinking about retirement can learn from the seven credit mistakes below:
1.) Assuming that you are nearing the end of the road. According to the Social Security Administration, the average life expectancy is 84 for men and 86 for women. Keeping that in mind, treat credit as a long-term asset accompanied with risks, responsibilities and important benefits.
2.) Avoiding Credit. Many seniors are proud of their financial accomplishments. Whether they have finally paid off their mortgage, payed off their credit cards or car. But if you ever need a loan and you have little credit in your name, your credit score could have dropped. This means you will likely have to pay higher interest rates if you ever need credit for a life emergency. Instead, get a credit card. But use it only as you would a debit card, charging only what you can afford to pay at the end of each month. This will help rebuild your score.
3.) Taking on too much debt. A recent study by Demos found that Americans aged 50 and over have an average credit card balance of $8,278, compared to $6,258 for people under 50. Senior debt has many causes. More than a third of people over the age of 50 with credit card debt use their credit cards to cover basic living expenses, which is a big mistake. This makes them vulnerable to debt collection scams and withdrawing money from retirement accounts to pay off credit card debt.
4.) Student Loans. Think twice before signing for any student loans. The average borrower over age 60 owes $19,521 in student loan debt, and 12.5 percent of them are delinquent on their payments. Some took college classes later in life. Others have debt leftover from school days long past or cosigned on student loans for their children and grandchildren.
5.) Co-Signing. To help their children or grandchildren purchase a car, new home or pay for college, many seniors have co-signed loans. Oftentimes, not realizing that lenders and credit reporting agencies do not distinguish between borrowers and co-signers. Instead, lend money directly. This will help your loved one establish credit of their own without endangering your financial future.
6.) Failing to check your credit score. Check your credit score for free once a year with each of the three major credit bureaus and sign up for tools such as Credit.com’s free Credit Report Card, which allows you to see your credit profile and provides free scores that update monthly. 36 percent of seniors who did this found errors which severely damaged their credit scores.
7.) Failing to understand reverse mortgage risks. A reverse mortgage can provide seniors extra money during retirement by tapping all the equity they have built up in their home. The loan is repaid only when they die, sell or move out of the home. It is important that you do your homework. Meet with a certified financial advisor to see whether a short- or mid-term reverse mortgage is right for you.
Click here to read more on credit mistakes that can wreck your retirement.
If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.