Credit Challenges for Seniors & Retirees
It is unlawful to deny seniors a credit line or loan because of their age. It clearly states in The Equal Credit Opportunity Act that it is illegal to factor in an individuals age when determining creditworthiness. However, retirees and seniors do have a difficult time getting approved for credit cards, mortgages, and loans- why?
Seniors 70 and older started out in a different era, spending habits were not centered around charging it. So, some seniors may not have established enough credit over time. While most seniors were at some point a homeowner, the price of homes 40 years ago was drastically lower than today and they probably paid off their mortgage before they retired which wouldn't now hold a lot of weight on a credit rating. Here are a few reasons seniors may be rejected when applying for a loan.
- Because seniors operated from a -pay for it in cash mentality some may not have an actual credit history.
- Maybe later in life they started "charging it" but because life can be challenging, struggled to pay their credit debt and actually have a bad score.
- Seniors are not bringing in income. Approval for credit is determined by debt to income ratio and most lenders want to see that a borrower has a steady source of income.
- Many retirees retired with debt and then racked up more debt paying for items with credit cards: medicine, co-pays, gifts, trips, daily essentials, groceries, utilities and gas.
- Also seniors often are challenged by health related expenses that occur after retirement. Credit checks don’t include health checks, but health care related expenses are always high in cost depreciating income sources and savings.
- Retirees function on a fixed income, lenders try to determine what a person can afford after their bills are paid, and that shortens the dollar amount a lender will give to a retired applicant.
- Unfortunately seniors may suffer the loss of a spouse which can mean problems with joint accounts that end up being closed or passed due. They could incur funeral expenses, or be stuck paying a two person debt with a one person resource.
- Also seniors may not be interested in pulling a credit report annually and may not even know if they were victimized by identity theft.
So while none of the above is actually ageism, these little details do hinder a credit score and impact a lenders decision towards rejection. How can seniors repair credit or build credit? The reality is a lender may not be comfortable approving a senior with a 30 year mortgage while on a fixed income and little savings.
It is important not to lose morale or initiative just because you are a senior. Everyone has the right to obtain an accurate credit report. In fact, ICC believes that everyone deserves an equal chance at a better credit score and we understand the challenges that seniors face as stated above. We can dispute outdated items or items that are listed incorrectly, we can help you build credit with a secure credit card – you do have options and we want to help.
- Understanding Credit:
