Credit

How to safeguard your credit score during pandemic and thereafter

protect credit score in pandemic

Credit score is the last thing in your mind when millions of people are struggling to get food, clothes, and a roof above your head. 

The country is in a state of national emergency. Over 30 million people have applied for unemployment insurance. Many more are in the queue. The financial situation of the people is obviously quite bad. People are somehow trying to keep their accounts in good standing through the various payment plans offered by credit card companies. 

However, despite the government’s support (through the stimulus checks) and creditors’ cooperation, it’s necessary to protect your credit score. Remember, you might not be on a spending spree right now. However, once the situation gets normal, you might want to buy an apartment or buy a car or go for a vacation. After several months of social isolation, your heart might yearn to explore new places. Unless you have a good credit score, it would be tough to obtain loans and make major purchases. So, you have to prepare your credit score to adjust to the post-pandemic life. 

2 Tips to protect your credit score during Covid-19 and thereafter

Check out a few tips to protect your credit score during Covid-19 and thereafter. 

1. Monitor your weekly credit report: Pandemic has given a few unexpected gifts to all of us. First, it has given us time to be with our family. Secondly, it has given us unlimited time to analyze our life from various perspectives. Thirdly, it has given you the scope to get a free copy of your credit report every week. All the 2 major credit reporting agencies Equifax, Experian, and TransUnion are offering free credit reports every week. So, you can analyze your credit health every week, which you couldn’t do before. 

If you have made payment arrangements with creditors, then check how they are reporting on your credit report. Are they updating your account status accurately? Verify that first. 

If you have opted for deferred payment or forbearance when your accounts were in good standing, then creditors are required to update them as ‘current.’ However, if you have applied for deferred payments or forbearance after missing payments for 30 days, then they will be reported as ‘late.’ These are a few minor things you have to be aware of. 

2. Find out how to take care of your debts: Your credit score doesn’t drop due to job loss. Rather, it goes down when you can’t make payments. If you make late payments, then that will be reported on your credit report. So, before you get late on your payments, you should discuss your payment options with creditors. Ask if you can qualify for hardship programs. And, if you do qualify for them, then know how it will appear on your credit report. 

What else can you do to protect your credit?

1. Maintain a 30% credit-utilization ratio: Don’t make too many credit card purchases as that may increase your credit utilization ratio. A high credit utilization ratio is bad for your credit score. If your credit limit is $1200, then try to keep your spending below $360. The ideal credit-utilization ratio should be below 30%. 

2. Pay your bills within the billing cycle: Late payments hurt your credit score big time. Usually, creditors don’t report late payments if you pay the bills within the grace period. However, if you fail to make payments during the grace period also, then late payments will be updated on your credit report. So, you need to be careful. It’s best to pay the bills within the billing cycle. 

Conclusion 

I think all of us are facing an unprecedented situation in our country. The government is trying its best to tackle the situation. But, no one knows when the ‘new normal’ situation will get back to just normal. All of us are desperately waiting for that time. However, in the midst of our waiting, we shouldn’t forget to take care of the credit score for dealing with the post-pandemic situation