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Obtaining new credit after retirement
Old 08-19-2014, 06:16 PM   #1
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Obtaining new credit after retirement

Most recent thread I could find on the topic was 4 years old, so I'll ask.

I'm curious about what others have run into when applying for credit after retirement. Not because it's a real need but for various reasons it's something you might want to do - a 0% interest rate on a car, bonus miles for applying for a new credit card, whatever.

Wondering how lenders view applicants who might have plenty of assets but no job income and/or haven't begun drawing SS. My gut feeling is credit would be hard to come by without documented income from a job, regardless of assets. (Not including situations where people have elite banking relationships and get special treatment).
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Old 08-19-2014, 06:22 PM   #2
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As long as your credit score numbers are still good you'll continue to get more credit card offers then you would ever want/need.
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Old 08-19-2014, 06:24 PM   #3
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Wondering how lenders view applicants who might have plenty of assets but no job income and/or haven't begun drawing SS. My gut feeling is credit would be hard to come by without documented income from a job, regardless of assets. (Not including situations where people have elite banking relationships and get special treatment).
My last foray into getting credit was in late 1998. It was a mortgage that I eventually decided to just skip. You are correct. Assets don't mean sht. They want you to have a j.O.B. One banker told me I could lose all that money and not be able to make payments. If I had that much money why not just buy it outright. As if I couldn't lose a J.o.B. from the exact same economic conditions that would make me lose half a million dollars overnight.

Maybe non-mortgage loans are different...?
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Old 08-19-2014, 06:26 PM   #4
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I just retired - and I just applied for a HELOC with PenFed. I'm pre-approved and they're reviewing my documents now.

Have a good credit rating, and show you have the income sources to make the payment and you should be good. We're showing rental income, DH's SS, I have a small RMD from an inherited IRA... apparently that was good enough.
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Old 08-19-2014, 06:44 PM   #5
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We've been retired for 8 years. We have absolutely no problem obtaining new credit. We use social security, pension, rental income and monthly withdrawal from our IRA as income.
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Old 08-19-2014, 06:45 PM   #6
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DW just got a dept. store cc with no difficulty and she hasn't had a job for 12 years.
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Old 08-19-2014, 06:47 PM   #7
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A 65 yr old friend recently purchased a modest condo in Fla. His only income is $15k SS and he had about $140k in an IRA. Pretty much nothing else. He lives on the $15k and a few kilobux/yr withdrawal from the IRA.

He got a 30 yr, $50k, 4.5% mortgage requiring him to put $20k down. Total condo cost was $70k. I was surprised he got the mortgage. It's through a conventional bank. His credit score is excellent.
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Old 08-19-2014, 10:37 PM   #8
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About a year ago, on a visit to my local bank to discuss something unrelated, the rep offered me a cash-back CC. I accepted. When the CC arrived, my credit score was included and it was 780. At the time, I hadn't worked in nearly 5 years. The CC limit is on the low side but I don't charge much and I have a backup card (my previous primary card). At some point I may ask for an increase in the limit.
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Old 08-19-2014, 10:46 PM   #9
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I decided to apply for an Amazon Visa credit card (my first credit card in 16 years!) three months ago. I had been retired for 4.5 years, and at that time I had not yet begun to receive any social security benefits. I think I checked "retired" and they didn't want much detail. They probably wanted last year's AGI or something of that nature.

Much to my surprise, they approved me immediately, despite the fact that I had been completely debt free since paying off my mortgage in 2006. I hadn't had any credit cards, car loans, other loans, helocs, or any other kind of debt for over 8 years and no job since 2009.

I think you should go ahead and try, and you may be pleasantly surprised too.
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Old 08-19-2014, 10:55 PM   #10
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No problem getting credit cards. We haven't taken out any loans since retiring.

They ask for annual income and "investment income" sometimes is a category you have to select of you don't have a pension. I use the prior year 1040 as my annual income - rounded.
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Old 08-20-2014, 04:32 AM   #11
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CC companies often request household income even if the card is solely in your name. This wasn't immediately obvious to me after REing. This may be of use to anyone what still has a working spouse.

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Old 08-20-2014, 07:08 AM   #12
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I just tried for the first time a few weeks ago- a Fidelity Amex that pays 2% cash back on everything. I listed my occupation as "Retired" and included only investment income and got the response that they couldn't give me an immediate decision but that they'd snail-mail a response. About a week later, the card arrived. I've got 4 other active credit cards (will cancel all but one as they come up for renewal) that I pay in full every month, plus a mortgage.

I don't anticipate that getting credit cards will ever be a problem as long as I keep paying promptly. I don't anticipate needing another mortgage- hoping to downsize by using the equity in this house to buy another one- but will probably take out a HELOC immediately for large purchases such as a new furnace so I don't have to tap the investments. That's worked well with our current HELOC, which is at 2.75%. I still pay it back; don't like encumbering the equity in the house.
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Old 08-20-2014, 07:38 AM   #13
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I am retired and my bank and mortgage holder often sends out e-mails for no-fee refi's and HELOC's at low interest. I applied online for each of these at different times. Both times they asked for a letter (maybe a form) with information about our pensions from our former employers. For retirees ex-employer has an automated phone system that never lets you get to a live person for help. Both times I gave up in frustration. I went to the bank in person and they immediately gave me a 20k line of credit "based on my credit score". Same with a new car loan this March - only credit score. Banks seem to look at long term loans differently for what they require.
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Old 08-20-2014, 08:59 AM   #14
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I put down "retired" on a credit application around 6 or 7 years ago. Within 90 days, the type of credit card solicitations I received in the mail changed. I stopped getting the cash back and other rewards and started getting garbage offers. One of my credit cards cut the limit by over 80 percent. Nothing else had changed. I paid my bills on time as I have for decades and my income and credit score did not change.

When I applied to refinance my mortgage in 2009, my mortgage broker told me never, ever put down on a credit application that you are retired. He said that many lenders viewed this as a huge increase in risk. The lenders look only at pension and Social Security income as the sources of debt repayment when you are "retired." Your credit options are reduced significantly. He suggested that I put down self employed in real estate or real estate investor as my occupation.

When I refinanced my house in 2012, I applied as self employed. The lender required a letter explaining all of my sources of income, despite having two years of tax returns, all of the 1099's and the bank and brokerage statements. The loan officer said the reason the loan was approved was that it was a streamline refinance with less documentation required for Fannie Mae and the loan to value ratio was low. Had I been starting from scratch, the loan would have been much more difficult if not impossible to get.

After the advice I received in 2009, I immediately started reporting my occupation as self employed in real estate on every application for anything, including bank accounts, but it has taken years to recover. I noticed the Trans Union credit report now supplied by Credit Karma shows both Retired and Self Employed as my occupations, with different dates. Apparently I will be forever tarred with the brush of "retired."
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Old 08-20-2014, 09:14 AM   #15
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No plans to apply for credit, but I wonder if i could list my annual Roth conversion as "pension income" since that is the way it shows up on my tax return and if they ask for verification I could simply provide them copies of my tax returns or 1099Rs from Vanguard. If they are so dumb as to ignore assets then I suspect they are dumb enough to go for it.
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Old 08-21-2014, 02:00 AM   #16
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Related other places on the forum, I have detailed the issues I went through getting a mortgage after retirement. Credit score was 815 or so, but the bank didn't like the idea that my only income was modest pension and DW's very modest SS. They didn't care about assets - just income. THEN they found out that I had 1040 income (from my tax returns) because I had been converting tIRAs to Roths. The actual assets had changed only by the amount of taxes I had paid on the transactions. Bingo! That was all they needed. Crazy! I could have SPENT the assets and they could have cared less. Just as long as I could show 1040 income of a certain level, they were just thrilled. So, if you want credit, spend your IRAs and 401(k)s on wine, women and song. Pay the taxes and then apply for a big mortgage. (Who's minding the store?) Naturally, YMMV.
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Old 08-21-2014, 07:04 AM   #17
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I figured that 1040 income was what mattered, so I always put prior year 1040 income (rounded) as the annual income on my applications in case I ever need to show the 1040.
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Old 08-21-2014, 08:16 AM   #18
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Quote:
Originally Posted by Koolau View Post
...Just as long as I could show 1040 income of a certain level, they were just thrilled. So, if you want credit, spend your IRAs and 401(k)s on wine, women and song. Pay the taxes and then apply for a big mortgage. (Who's minding the store?) Naturally, YMMV.
The scary part is that some of these bozos think they are the smartest guys in the room.
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Old 08-21-2014, 08:28 AM   #19
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Getting a mortgage or HELOC might be more difficult without a large down payment or an income. That is why it is important to get the largest HELOC you can before you lose W2 income.

To get a solid credit score is easy, especially if you do not have bad credit. Even if you have bad credit. Apply and receive a secured Visa card. Use it. Make payments. Your credit score will go from nothing to 700+ in just a few months.
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Old 08-21-2014, 12:07 PM   #20
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Originally Posted by Koolau View Post
Related other places on the forum, I have detailed the issues I went through getting a mortgage after retirement. Credit score was 815 or so, but the bank didn't like the idea that my only income was modest pension and DW's very modest SS. They didn't care about assets - just income. THEN they found out that I had 1040 income (from my tax returns) because I had been converting tIRAs to Roths. The actual assets had changed only by the amount of taxes I had paid on the transactions. Bingo! That was all they needed. Crazy! I could have SPENT the assets and they could have cared less. Just as long as I could show 1040 income of a certain level, they were just thrilled. So, if you want credit, spend your IRAs and 401(k)s on wine, women and song. Pay the taxes and then apply for a big mortgage. (Who's minding the store?) Naturally, YMMV.
This has been a problem since the 2008 crash. Apparently the banks, appraisers, etc. have tightened rules partly in response to new Fed regulations. They have to be able to qualify for selling the mortgages to another lender (Fannie, Freddie ?). That's how I understand it as we had similar problems in refinancing a modest mortgage.

I'm sure these rules will relax as time goes on.
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