How to Protect Your Credit Score during the Pandemic

How to Protect Your Credit Score during the Pandemic

May 28, 2020         Written By Heaven Speirs

The COVID-19 pandemic has taken a toll on most American households. In one way or another, your income or savings have likely been compromised over the last few months. Your credit score does not have to suffer along the way. It could take months to rebuild your credit after a financial blunder. If you protect your credit score now, you can save yourself from long-term recovery. Here are some simple tips for preserving your credit score during the pandemic.

Make Minimum Payments for All Bills…On Time!

Typically, we encourage consumers to make more than the minimum monthly payment for credit cards and loans. This saves money in interest and lowers your credit utilization rate. During this unprecedented time though, making extra debt payments may not be feasible. That extra money could be put into savings or used to pay other bills.

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To protect your credit score, make the minimum payments for all of your bills. Submit these payments on time, or work out a payment arrangement to keep your accounts in good standing. Utility bills, phone bills and housing bills should also be paid on-time, even if they are not directly reported to your credit. Late payments will lead to late fees, which will hurt your already-reduced income. Creating a budget can help you visualize all the minimum payments that you have on a monthly basis.

Explore the Forbearance Programs Available to You

The truth is that you may not be able to cover all of your bills with your current income. In that case, you should look into a forbearance program from your credit card company, lender, utility company, and other bill collectors. Many credit card companies have offered relief during the COVID-19 crisis. This includes waived interest, skipped payments, temporarily postponed payments, and more. These services are often available on a case-by-case basis, so you could talk to your credit card issuer about the options that are available to you.

If you decide to delay a payment for a loan, make sure you read the terms carefully. Some lenders are allowing multi-month payment delays, but the total amount of the bill is due at the end of the delay. In other words, you may be liable for four months of mortgage payments before your income has resumed. Only commit to forbearance offers that fit your short- and long-term needs.

Quickly “Boost” Your Credit Score

If you have been making your utility payments on time during the pandemic, you may be able to quickly boost your credit score. If these bills were paid on time, you could instantly boost your credit score with Experian Boost. Only positive payments are taken into consideration. If you have late payments, they will not lower your credit score through Experian Boost. They could, however, lower your credit score through the foundational scoring model.

Add your positive utility payment history to instantly increase your FICO® Score

Avoid New Debt Until Your Income Stabilizes

You may be tempted to rack up credit card debt while your income is reduced, but that will only hurt you in the long run. More debt means higher minimum payments, more stress in the future, and a higher credit utilization rate, which is a measure of how much credit you have used versus how much credit is available to you. Stay away from new debt as long as possible and focus on keeping your existing accounts in good standing. Small sacrifices now can prevent a drastic credit score drop in the future.

There is one exception to new credit. If you have bad credit but your income has stayed steady through the pandemic, it may be a good time to get a secured credit card to help you build a positive credit history. Especially with the stimulus checks that many Americans are receiving. If you are unsure of what to do with your stimulus check you could use it to open a secured credit card. Secured credit cards require you to put down a secutiry deposit to open your account but are a great way for you to begin building a better credit score if your use it responsibly. They typically come with lower APRs than unsecured credit cards for bad credit as well. You will want to assess your personal situation before getting a secured card. Make sure you will not end up needing your security deposit back after you have opened the account. Closing a credit account is not beneficial to your credit score.

The information contained within this article was accurate as of May 28, 2020. For up-to-date information on any of the terms, cards or offers mentioned above, visit the issuer's website. Many of the offers on this article are from our affiliate partners, and LowCards.com may be compensated if you take action with any of our affiliate partners.

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heaven

About Heaven Speirs

Heaven Speirs is a contributing writer for LowCards.com. She remains up-to-date with the latest developments in the credit card industry and the financial sector as a whole. Heaven has over 10 years of experience in online journalism, the bulk of which has been focused on personal finance. Heaven attended Oklahoma State University, where she discovered her talent for research and content creation. In her spare time, Heaven enjoys painting, playing poker, and spending time with her husband and three dogs.