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Credit scores still matter even if borrowing is over

March 28th, 2021 10:52 AM by Sam Kader MLO130505

At some point you will buy your last car and refinance your last mortgage. Surely, you can stop worrying about your credit scores right? Well, not really. Let's start with some reasons why maintaining good credit scores is a lifelong process

  1. Lenders aren't the only ones checking your credit. Most insurers are credit based insurance scores to help set premiums for auto, homeowners and renters policies. Even your cell phone providers often reserve their best deals for those with the best credit. Many potential employers check your credit reports should you want to work or return to work in retirement. Utilities and landlord also typically check credit scores if you move. Senior housing assisted  living and continuing care retirement communities may also use credit histories and scores to evaluate applicants. 
  2. Your borrowing days may not be over. You may need money to pay medical bills, replace a car, help a family member, make a house repairs or remodel your home to allow you to age in place. You may want to access some of your equity with a reverse mortgage. Reverse mortgages allow homeowner age 62 and better to tap their home equity without having to repay the loan until they sell, move out or die. Reverse mortgage lenders typically don't have minimum credit-score requirements but a credit check is part of the financial assessment needed to get the loan. 
  3. Maintaining good credit scores isn't that hard. A single credit card is enough to maintain good credit cores as long as it reports to all three credit bureaus. The card should be used lightly but regularly and balances paid in full. 
There are instances when credit scores shouldn't be your top priorities. 

  • You are struggling to pay your bills. It make little sense to keep sending money to credit-card company if you having trouble paying for necessities: shelter, food, utilities and medications. Consider talking to a credit counselor near you and to an experienced bankruptcy attorney about your options. 
  • You need to file for bankruptcy. If bankruptcy is your best option, then you should consult with an experienced bankruptcy attorney. Bankruptcy is not a credit-score killer it's often reputed to be. Credit scores typically plunge in the months, before a bankruptcy filing but then start to rise soon after with responsible credit use. It's possible to get back to bear-prime credit scores within a few years after bankruptcy. 
  • You are trying to escape a onerous time share. There's often no easy way out of a time share that requires paying annual fees and other costs. Sometimes owners can give the time share back to the resort developer or sell or give it away. Other times, the only way to get rid of it is to stop paying and experience the consequences which can include foreclosure and credit-score damage. Older people with less reason to borrow may well decide to hit to their scores which can linger for up to 7 years and up to 10 years for bankruptcy It 's better than continuing to struggle the rest of your lives. 

Should you choose to embark on any of the below journey, here's how a derogatory remark will affect your credit scores: 

What can lead to a derogatory mark?What is it and what happens?How long might the derogatory mark appear on a credit report?
Late paymentsAn account payment that is past due. This is generally the only form of a “minor” derogatory mark. After the payment is late, its severity may increase every 30 days it’s not paid.Seven years from the date of a delinquent payment.
An account in collections (or charge-off)When a creditor thinks you ultimately won’t pay what you owe, usually after several missed payments, it can write or “charge off” the account for tax purposes. After a creditor has charged off the account, it can sell it to a third-party collections agency. The collections company will try to get a payment from the borrower.Seven years from the first date of a delinquent payment.
BankruptcyThis is a special legal proceeding you can enter to request relief from debt obligations. You’ll either pay back some or none of your debt.7 to 10 years from the filing date, depending on the type of bankruptcy.
Civil judgmentIf you’ve lost a civil lawsuit that requires you to pay debt or damages, it can appear on your credit reports.

Paid civil judgment: Seven years from the date the judgment was filed.

Unpaid civil judgment: The seven-year time frame may be renewed depending on local laws.

Debt settlementYou and a creditor can reach an agreement where you pay back only part of the debt you owe.Seven years from either the date the debt was settled or from the date of the first delinquent payment, depending on whether there were missed payments.
ForeclosureA foreclosure can happen if you fall seriously behind or miss many of your mortgage payments. The bank will attempt to force a sale of the home, which is then used as collateral for the mortgage loan.Seven years from the filing date.
Tax lienIf you fail to pay your taxes, the federal government will attempt to collect your debt by placing a lien, which is a claim, against your property.

Paid tax lien: Seven years from the filing date.

Unpaid tax lien: Can remain on a report indefinitely.

Posted in:Credit Score, FICO and tagged: Credit ScoreFICO
Posted by Sam Kader MLO130505 on March 28th, 2021 10:52 AM



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