With all that’s going on around the world, your credit score might be the last thing on your mind. And understandably so. But dings to your credit can last long after the pandemic ends, affecting your ability to do things like buy a home, open a credit card, even land certain jobs. If you are facing financial difficulty, there are things you can do to keep your credit score healthy. Following a few simple guidelines now can save you some big headaches in the future.
Get proactive and talk to your creditors
If you can keep making payments to your lenders, it is best to do so. This keeps you on track towards paying off your debt on time. But if you’re not sure you can pay your upcoming bills, know that you aren’t alone. Many are struggling right now. Fortunately, some companies are supporting their clients by offering lower payments, temporary forbearance, halts in reporting to credit bureaus and more. Get in touch with your lenders to ask about your options and be sure to do it before you start to run into trouble—they’re more likely to help if you reach out before missing your first payment.
Stick to your payment schedule
It doesn’t matter whether you owe $10 or $10,000, a significant portion of your credit score is based purely on whether or not you’re paying on time. So make paying on time a priority. If paying in full isn’t currently possible, try to meet the minimum payment. You will pay more interest in the long run but it might be worth it to keep your credit intact.
Mind your credit limit
A general rule of thumb is that you shouldn’t use more than 30 percent of your available credit or it may impact your score. It may seem counterintuitive, but asking for an increase in your credit limit can lower the total amount of credit you’re using and cushion your credit score. Just make sure you proceed with caution. Increasing your limit only to use more credit can do more harm than good. And remember, you’ll have to eventually pay off that money, which could be accruing interest at a much higher rate.
Think twice before closing a credit card
Another way to make sure you’re not using more than 30 percent of your available credit is to keep your credit cards and/or lines of credit open. If you close a card with a $5,000 limit that you weren’t using, you’re eliminating $5,000 in available credit, which can throw off your credit used to credit available ratio. Also, the length of time your account has been open factors into your credit score, so if your credit card has been open a long time, keeping it open can help you out.
If you see something, say something
In times of uncertainty, it’s smart to keep a close eye on your credit score. Many credit cards and bank accounts offer free credit monitoring, and you can check your full credit report for free once a year through one of the bureaus. Set a schedule or put a reminder in your calendar if you think you’ll forget, and check as often as once a month. Look for anything that doesn’t seem right, including inquiries or accounts you don’t recognize. There are number of ways to protect yourself amid all of the COVID-19 related scams circulating now, and it only takes one to impact your credit. Dispute any questionable information you find directly with the credit bureaus.
Take stock of your finances
The most obvious and possibly most challenging way to maintain or improve your credit score is, well, to pay down your credit. When your finances are tight, it can be even trickier. But still, there are some budgeting shortcuts out there that can make your money go further right now, before you start to feel relief from the stimulus benefits.
Getting protection under the CARES Act
- Accounts you’re unable to pay must have a forbearance or modified plan in place
- All accounts prior to any forbearance plan need to be up to date