After retiring from work life, people often don’t realise immediately that their income profile has changed and accordingly they need to also make necessary adjustments in their lifestyle and financial habits. Not adjusting financial habits is reflected in the senior’s CIBIL score as it drops suddenly. Here are some of the financial habits that often impact the credit score of senior citizens.

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Multiple Credit Enquiries

Before retirement, you may have a habit of frequently applying for a loan and closing it but such practice needs to be stopped after you retire. Each time you make a serious loan enquiry, the lender accesses your credit score for a hard enquiry. It results in a drop in the credit score and your loan enquiry is reflected in the credit report. If there are multiple loan enquiries, the credit bureau may assume that the borrower is credit-hungry and financially needy, thus impacting the credit score negatively. If you need a loan after retirement, plan it and avoid applying repeatedly.

Adding New Debt After Retiring From Work Life

When you apply for a loan during your working life, the loan amount is sanctioned based on your income and repayment capacity. After retirement, the active source of income goes away. Your borrowing capacity comes down to the extent of your loan obligation. After retirement, you have to repay loan EMIs by using the return earned on your retirement corpus, so a new debt further squeezes your borrowing capacity. So, adding a new loan during retirement can negatively impact the credit score.

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Closing The Old Credit Cards

Your old credit card consists of your long credit records. Sometimes seniors surrender their old credit cards closing their long credit records, thus resulting in a negative impact on credit scores as well. When a credit card is closed, the total sanctioned credit limit across various credit cards reduces, thus the credit utilization ratio of the card user may go up and impact the credit score negatively.

Co-signing A Loan Or Becoming A Guarantor In A Loan

In many cases, the close relatives of the senior citizens include them as co-borrowers in the loans to improve their loan eligibility. For example, borrowers with low credit scores can include their senior citizen parents with good credit scores as co-borrowers to improve their loan eligibility. However, if the primary borrower fails to pay the loan on time or becomes a defaulter, it negatively impacts the credit score of the cosigner or the guarantor as well. So, seniors need to be careful when extending support to close relatives in getting a loan.

Sometimes seniors shift to another home or change the city after their retirement. However, they forget to update the address in their loan accounts, credit cards, etc. Any discrepancy in the name, address and contact details in various loan accounts mentioned in the credit report can result in a negative impact on the credit score. So, don’t forget to get your details updated in all the financial instruments after your retirement.

The author is an independent financial journalist.