Grandma Got Run Over By a Credit Score
Why it’s imperative to protect aging loved ones’ credit scores
Why does grandma need to worry about a credit score? Or any of your other aging loved ones, for that matter? For 70, 80, 90, maybe even 100 years, they have managed their books all on their own. And they won’t be in the market for a new Macy’s credit card or financed Subaru ever again.
So why be worried now, when grandma is least likely to need credit? Because she is likely to need nursing care at some point. And for that, her credit score really matters.
Medicare doesn’t pay for long-term care, so most aging citizens rely on their own wallets for it. If grandma has bad credit, a facility may not believe she’ll be able to meet the sky-high payments that are long-term care. And then, when she needs the care most, she may be denied because of her credit score, even if she can truly afford it.
What if grandma intends to never set foot in a nursing home? In-home care is even more excruciatingly expensive than the cost of a nursing home. Few people in America can afford this care for any length of time solely out of their saved resources. So they often have to turn to their home equity to pay for care, in home or out.
A reverse mortgage enables a homeowner over the age of 62 to borrow against home equity. The loan only comes due after the borrower dies, moves or sells the house. House proceeds are then used to pay off the loan; if any value is left at sale, the beneficiaries can keep it.
A Home Equity Line of Credit (HELOC), not limited to seniors, is a revolving line of credit secured by the house, with the home as collateral. Payment is due based on the terms of loan repayment as attached to the house—not external circumstances such as death or relocation of the borrower.
Accessing care, from qualifying to enter a home to refinancing your current home, all depend on a decent credit score, which is why grandma’s credit score matters so much. Indeed, a HELOC generally requires a minimum credit score of 620, but the best rates require a score above 700. And while there’s no set minimum credit score to qualify for a reverse mortgage, all borrowers undergo a full financial assessment that takes into account the same factors that go into calculating your credit score.
Unfortunately, just when things like credit scores become super important for a loved one’s long term care prospects is around the time her mental capacity is likely to start declining. And often the first symptom of a decline in mental capacity is a lapse in executive functioning around banking. In fact, this type of oversight is often a first sign something is wrong--someone who never missed a bill, suddenly has a few fall through the cracks.
A recent study found that everyday financial behaviors—captured in routine banking data—can signal early signs of cognitive decline and financial vulnerability in older adults, up to a decade before formal intervention. Read the study here.
In the grand scheme of financial things, this is not a big deal. Especially if they catch the bill and pay it before it goes to collections. But little slip ups like this could impact their credit scores. And that could be a big problem down the long-term care road.
So what can you do to help, and how can you do it without making your aging loved ones feel like you are robbing their independence? Here are 6 suggestions—all of them mildly annoying to implement, but crucially important and worth your while:
Reduce the credit limits on their cards. If they do act impulsively or recklessly, there is a cap on what they can spend so they don’t spend beyond their means to repay the debt.
Receive account alerts to your own accounts so you are notified if a payment is overdue or if an unusual amount is spent.
Freeze credit at all three bureaus (Equifax, Transunion, and Experian) so no one can fraudulently or spontaneously apply for credit in their name. You can unfreeze it at any time when you need to apply for legitimate credit.
Monitor their credit reports and credit scores. Twice a year, request credit reports and check that the score hasn’t changed dramatically but also read the report to see if anything unusual is going on.
Move fixed recurring bills to autopay (utilities, insurance, phone) so they are less likely to be missed.
Consolidate accounts into fewer institutions so you have less to track.
Handling the aging of a loved one is overwhelming. Monitoring their credit score is just another administrative burden to have to add to your list. But this one task keeps open the possibility of being able to qualify for the care your loved one is almost certainly going to need down the road. So, please, don’t let grandma (or any other aging loved one) get run over by her credit score.
“To care for those who once cared for us is one of the highest honors.”
– Tia Walker
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