Obtaining Credit (Age 62 & Over)

Credit doesn't cease to be an important money management tool as we age. Yet older consumers, particularly older women, often find it difficult to get credit. Often they experience many of the following pitfalls:

Paying Cash - If you've paid cash all your life, opening a credit account later in life may be difficult. That's because lenders typically want you to have a "credit history" so they can see how you paid off credit in the past. Paying cash, in full, sounds like a great way to handle finances but unfortunately, that won't give you a sound credit history. So when the time comes that you really need to borrow money - you may have problems.

Income limitations - If your income is limited, you may also find it difficult to obtain credit because of "insufficient income".

Deceased Spouse - If your spouse passes away and you have joint accounts, creditors may attempt to close them. That's because a "joint account" had both of you on it and therefore was more secure than it would be otherwise.

Under the federal Equal Credit Opportunity Act (ECOA), it's against the law for a creditor to deny you credit or terminate an existing credit simply because of your age; however, there are certain circumstances in which age can figure into the process of obtaining credit.

Applying for Credit

Today, applying for credit entails much more than the personal evaluations that used to be standard. Instead, computers look at a wide range of information and then issue you a score based on their formulas. That score is then used to decide if you are a "good risk" or not. Other information, including your actual credit report may also be used.

One of the major factors that goes into both your credit score and any decision based solely on your application and credit report, is your income. Most lenders would prefer income from full-time employment; however, consideration must be given for the types of income the elderly are likely to receive. These include salaries from part-time employment, Social Security, pensions, and retirement benefits.

You may also find that telling creditors about assets other than income (such as your home, additional real estate, savings accounts, stocks, and bonds) may help you obtain credit. That's because they have something to use to secure payment.

Credit-insurance, insurance that pays off the creditors should you die or become disabled, is not available to most consumers over the age of 62. However, you can not be denied credit because of this.

There are certain instances when creditors can consider your age, though. These include instances when they would favor applicants who are age 62 or older or when they are determining other areas of creditworthiness (for instance - if you were approaching retirement age and may expect a loss of income).

A creditor may also consider age as it relates to certain elements of creditworthiness. For example, if at the age of 65, you apply for a 30-year mortgage, the lender may be concerned that you may not live to repay the loan. However, you can apply for shorter loan terms, increase your down payments, or use other assets to guarantee payment.

Checking your credit history is very important. Lenders will check your credit history before extending any credit to you. Therefore, knowing what's in it will help you out a lot. You may want to request that lenders that are not reported in your credit history be added. Sometimes certain lenders don't report to credit bureaus and if you have a sparse credit history you should certainly make sure those reference you do have are reported. Some bureaus may charge a minor fee for this. Also, you will want to make sure that any shared accounts are reported in both your and your spouse's names.

If you are denied credit because you have no "credit history", consider establishing one. The best way to do this is by applying for a small line of credit from your bank or by applying for a low-limit card from your local department store. Make sure you list your best financial references on these applications. Once you start, make sure to keep up with your payments and make certain that the creditor reports your credit history to a credit bureau.

Under the ECOA, a creditor cannot automatically close or change the terms of a joint account just because of the death or a spouse. The creditor may ask you to update your application or reapply. This generally is legal only if the account was based on all or part of your spouse's income or if the creditor believes your income alone cannot support that line of credit.

After you re-apply, the lender will determine whether or not to continue to extend your credit or to change your credit limits. Your creditor must respond in writing within 30 days of receiving your application. During that time, you can continue to use your account without the new restrictions. If you're application is rejected, you must be given specific reasons.

The Equal Credit Opportunity Act does not guarantee that you'll get credit but if you are denied credit, you have the right to know why. There may be errors in the computer system that caused your application to be improperly evaluated. In which case, you can ask for it to be reconsidered.

If you believe you've been discriminated against, you should write to the federal agency for that particular lender. Your complaint letter should state only the facts. Send it, along with copies of any supporting documentation. You may also want to contact an attorney to help protect your rights. You do have the right to sue any creditor who violates the ECOA.