First of all, seniors should check their credit report, and it is also recommended not to close long-held accounts and use secured credit cards in order to build credit.
Is It Harder For Seniors To Get Credit Cards?
Older people, like everyone else, need credit cards. They need them to finance daily purchases, to buy clothes, to earn rewards toward vacation and so on. However, Experian claims that people born between 1946 and 1964 carried about 4.8 credit cards in the second half of 2019. You'd be surprised to know that this is more than any other generation in the report!
Many people believe that older people have the highest chance of getting a credit card because they have a lot of time to build a good and long credit history and show their responsible borrowing habits. In fact, there is some truth in this. What's more, the Equal Credit Opportunity Act prohibits lenders from discriminating against credit card applications because of age!
However, old people still occasionally face problems getting a credit card. Below you can explore the main points that may affect your creditworthiness.
Why Seniors Can Get Rejected When Applying for a Credit Card?
There are several main reasons that can affect whether older people get approved:
You probably know that when you apply for a credit card, lenders will ask you to provide your annual income. This is necessary so that the bank can be sure that you can really pay off the loan received. However, if you are currently retired, then you most likely do not have a job and a stable income, which means you live on a smaller amount. Sometimes this can affect your ability to get money for your needs.
However, you should pay attention to the fact that in addition to the traditional salary, you can include all the income you receive. These include dividends and interest, Social Security benefits, income from retirement, investments, part-time jobs, spouse income and so on.
- Credit files
Many older Americans work hard all their lives to pay off their mortgages and have some savings, so they often think that their credit score is not that important. However, if one day you are faced with large expenses, the need to make a large purchase or, for example, to rent an apartment, then you will understand that the credit is still of great importance. Thus, in order to have a FICO credit rating, you must remember to report your credit activity to credit bureaus at least once every six months.
So, if you have paid off your debts and have not had any credit activity for a year or more, then you may be denied due to the fact that the credit bureaus do not have enough information about you. So, if you don't have enough information in your credit files to create a credit score, you may have difficulty getting a credit card.
- Mix Of Credit
Also, you should pay attention to the fact that the constant use of credit cards does not guarantee that you will be able to get a new credit card when you need it. If your credit file contains only credit card accounts but no other types of credit (such as Mortgages, Installment Loans, and so on), this can worsen your credit and reduce your chance of getting financing.
You may run into this problem as the mix of credit is often important for credit scoring models. So if you have variety of accounts, it shows your experience with different types of loans, which means you have a good mix of credit. Pay attention to this point before applying for a new credit card.
Another point that can negatively affect your ability to get a credit card is co-signing. If you previously co-signed on a loan for your children or grandchildren, then this could also negatively affect your credit.
You probably know that when you co-sign a loan, your payment history is also reflected in your credit reports. Thus, if the person with whom you co-signed a loan misses payments, then this will negatively affect your credit.
How Can Seniors Increase Their Chances of Getting Credit?
While retirees may face a number of challenges getting a credit card, there are still a few tips that can help them improve their chances of getting approved. Let's look at the main ones:
- Pay attention to your credit report. Of course, the very first thing you should do is to constantly check your credit report in order to know what condition it is. You also need to make sure that there are no mistakes that could negatively affect your credit. If you find a mistake you need to report it as soon as possible.
- Use a secured credit card. If you are looking to improve your credit then a secured credit card can be a great option for you. It works just like a regular credit card, however you will need to make an upfront deposit which will act as your credit limit. It also protects a card issuer in case you can't get your money back on time. Once you improve your credit with a secured card, you can switch back to a regular credit card.
- Say goodbye to long-held accounts. Even if you're trying to improve your credit score, don't close old credit cards, as the length of your credit history and the average age of accounts also affect your credit score.
- ‹ Previous Article
- Next Article›
- How Often Do Older People Get Into Car Accidents?
- Types of Life Insurance For The Elderly