More than ever these days older Americans are getting the squeeze. The cost of healthcare is rising, pensions to supplement Social Security have been going away for quite some time, savings aren’t growing due to lower interest rates and, most significantly, credit debt has seen a huge rise. The following are some of the biggest mistakes that older Americans are making with credit. We put them together today to alert our readers to what is happening and what can be done to avoid them.
Too much credit is being used. With an average combined balance of over $8300 on credit cards, Americans over 50 are increasingly struggling with credit debt. Indeed, research coming out of Kent State University showed that the biggest area of the population that’s filing for bankruptcy are people over 60. One of the biggest reasons for this is that many older citizens are using credit cards to pay for their basic living expenses.
What can be done: before tapping into retirement funds or getting a reverse mortgage, find a reputable credit counseling agency or get advice from a bankruptcy attorney to know what your options are. At the same time, be sure to know your rights before paying any debt collectors.
Too little credit is being used. On the other side of the fence are seniors who avoid using credit completely and, with cars and homes that are paid for, they either pay cash or use a debit card for all of their purchases. The problem with this is that it doesn’t help their credit scores and, since the scores are sometimes used to determine homeowner discounts or auto insurance, avoiding the use of credit completely means that they might not be getting the best rates. Also, debit cards have fewer consumer protections against fraud and billing disputes than credit cards.
What can be done: Getting 1 or 2 credit cards to add references to your credit reports is an excellent idea if they are used sparingly and paid in full at the end of every month. They can be used for safer online shopping at and also for a backup payment method when traveling.
Cosigning loans for family members. When people become grandparents it seems that family members start looking at them like their own personal ATM machines. A grandson who wants to get his first car, a daughter who’s just gone through divorce and needs to rent an apartment or another family member who needs a small business loan. Cosigning for these loans and expenses is what most older folks do but many times they do it without a full idea of the risks involved.
Indeed, a recent Demos survey showed that nearly one quarter of respondents aged 50 or older had some type of credit card debt that was due to paying off the debts of their relatives. The problem is that if the primary borrower, for whatever reason, doesn’t pay back the cosigned loan on time, not only will the person who cosigned be forced to pay but also any negative incidences like late payments or non-payments will show up on their credit report.
What can be done: Simply put, don’t cosign loans. If a relative is in financial trouble consider blending them cash instead. If you’ve already cosigned a loan that has turned sour, you may need to have an attorney step in and protect you from further damage to your credit score.
Not keeping an eye on credit reports and credit scores. Many older folks that aren’t planning on doing any borrowing take a lackadaisical approach to their credit reports and credit scores and sometimes don’t check them for years on end. The problem with this, as far as a CSA Journal study shows, is that 36% of credit reports on people 60 or older have at least one mistake that could have a significant impact on their credit.
Identity theft is also a big problem and, unless a person is checking their credit report regularly, the damage that an identity thief could do could be devastating. According to several consumer protection agencies, almost 40% of identity theft complaints made in 2012 where from people 50 years old and older.
What can be done: This is one of the easiest things to take care of and involves simply getting a credit report once a year and checking it thoroughly for discrepancies, mistakes and anything that looks out of the ordinary. Under federal law, every United States citizen is entitled to a free credit report from the major credit reporting agencies once a year.
If you are an older or senior citizen, hopefully these problems haven’t already affect you. If you are suffering from the effects of credit problems, please let us know and we will do what we can to give you advice, answers and solutions.