5 steps to protect your credit score during a pandemic
While many people delay major purchases, like buying a house, car, or going on vacation, you’ll need good credit when you eventually want to start spending again, said Charlie Wise, vice president of research and spending. consulting at TransUnion.
“It’s important that your credit is in good shape,” Wise said. “You don’t want unexpected surprises. Consumers will want to spend again and you’ll want to keep your credit healthy.”
Here is a step by step guide to staying on top of your credit score now.
1. Check your credit report early and often
If you are working with lenders on payment arrangements, it is important that you know all of your creditors and have a clear “before” picture of your credit image.
“Check to make sure things are being reported accurately when working with your lenders,” said Rod Griffin, senior director of consumer education and advocacy at Experian.
An added benefit of starting with the credit report?
“All of the contact numbers for all of your lenders are on the report,” said Amy Thomann, consumer credit education manager at TransUnion.
2. Know your protections
If you enter into an assistance agreement with a creditor – for reduced or deferred payments, for example – and you are up to date on your account, you will be declared up to date even if you do not make regular payments, as long as you adhere to your agreement.
“It will be flagged as current until the end of this forbearance,” Griffin said. “If there is a 30 day delay when you enter into the deal, there will be a 30 day delay.”
This applies to agreements put in place after January 31 and up to 120 days after the March 27 enactment of the CARES Act on June 25, or 120 days after the end of the national emergency, whichever is later. .
3. Know what impacts your score (and what doesn’t)
Being unemployed does not affect your credit score. But missing payments or making late payments will.
“That’s why we recommend consumers to proactively contact their lender,” said Thomann. “Ask them if they have a hardship program. Find out how it will be reported to credit reporting agencies. “
Late payments are usually not immediately reported to credit bureaus. It usually takes at least a full billing cycle, Griffin said.
“You shouldn’t panic from a credit reporting standpoint,” he said, “but you should make a plan.”
By regularly checking a report, you won’t see changes every week, he said. “But if you work with multiple lenders and discuss options, you may see changes more frequently at a time like this.”
Don’t worry too much if you are applying for a new credit card. Seeking additional credit shouldn’t have as much of a negative impact on your credit as missing payments.
“In-depth inquiries have an impact on your credit score,” said Thomann. “But that’s not as big a concern as making your payments on time and keeping credit usage low. “
4. Don’t use your credit card too much a lot
Your credit can be a vital safety net right now, but keep an eye on how much credit you’re using. Running your cards can lower your score.
Generally, using more than 30% of your available credit will lower your score. If your limit is $ 10,000, for example, you should use less than $ 3,000 for all of your credit cards, not just one.
“When you increase balances, your debt utilization rate will increase and your scores will decrease,” Griffin said.
For a lot of people, that might not be the biggest concern right now. If you rely on credit for your basic needs, late payments will have a bigger impact than using your cards.
“Getting food, keeping a roof over your head and making sure everyone stays healthy are the most important considerations right now,” he said. “So, this might not be the time to worry if your score drops a bit.”
But be aware that when you can pay off those really high balances, your credit usage will go down and your score will go up again.
5. Take advantage of ways to increase your score
Some credit rating agencies have programs to help you increase your score by giving you credit for other bills that don’t usually appear on a credit report, such as your utilities or your cell phone.
“Use every tool and every resource you can to strengthen your credit history throughout this time,” Griffin said. “[Consumers should] add this information as it can improve their credit scores and position them better to emerge from this crisis. “