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How to build credit history and not turn ‘credit invisible’

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Dear Liz: After reading about people being “credit invisible,” I’m wondering if I should have a credit card to build a payment history. I’m 67 and on Social Security. I thought having a guaranteed income and no outstanding debt would be appealing to a potential landlord while applying for an apartment, but maybe that’s not the case. What do you recommend?

Answer: Roughly 1 in 10 U.S. adults doesn’t have a credit report and is considered “credit invisible,” according to the Consumer Financial Protection Bureau. Without a credit history, many common financial transactions can become more difficult or expensive, and that includes renting an apartment. Landlords often check credit reports or credit scores or both when evaluating potential tenants.

You can use the free AnnualCreditReport.com site to see if you have credit reports at the three major credit bureaus. (Make sure you type “annualcreditreport.com” into your browser, because using a search engine may turn up a lot of lookalike sites that will try to charge you for credit monitoring and other services. If you’re asked for a credit card, you’re on the wrong site.)

If you don’t have a credit history, there are a number of ways to start building one.

Perhaps the quickest is to ask someone with good credit to add you as an authorized user on one of their credit cards.

Another good option is a credit builder loan, which is offered by some credit unions and online lenders. The money you borrow is typically placed in a savings account or certificate of deposit that you can claim once you’ve made all the monthly payments.

Finally, there are secured credit cards which give you a line of credit that’s usually equal to the amount you deposit with the issuing bank. Ideally, you would be able to upgrade to a regular unsecured card in a year or so.

When to start Social Security

Dear Liz: I’m confused by your answer to the question about starting Social Security too early. You wrote that someone who decides they made a mistake can suspend the benefit once they reach full retirement age. From the description, it sounds like there is no penalty for this option, so everyone should do it! This sounds too good to be true, so I (and maybe others) might be misinterpreting this. It sounds like you get early benefits from 62 to full retirement age, then the full delayed benefit at 70.

Answer: Keep in mind that your Social Security benefit is permanently reduced when you start it early. The earlier you start, the bigger the reduction.

Social Security allows you to suspend your benefit once you’ve reached full retirement age (currently between age 66 to 67). While it’s suspended, your benefit will receive delayed retirement credits that will increase your checks by 8% each year until age 70. Your benefit also continues to receive cost of living adjustments, whether you’re currently receiving it or not.

A suspension can help you offset some of the reduction you incurred by starting early, but you’ll never get as much as if you’d waited until age 70 to apply.

Service at online banks

Dear Liz: You recently wrote about online banks versus brick and mortar, but you missed one point in favor of local banks. If there is a major screw-up, you can go there and talk with a person. That’s better than being stuck in an endless phone loop or with an unhelpful “bot” online. And being face to face (pleasantly) is more likely to get help and sympathy.

Answer: Banks vary enormously in the quality of their service. Some online banks pride themselves on quickly connecting their customers to well-trained human representatives around the clock. Meanwhile, some local banks have indifferent staff and inconvenient hours.

But we can agree that chatbots — computer programs that purport to answer common customer questions — often provide a truly awful user experience. Any bank that refuses to connect you to a human being on request is a bank to be avoided.

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