How To Keep Your Credit Score Healthy During COVID-19
When the COVID-19 pandemic began in 2020, it brought with it major health concerns, high unemployment rates, social distancing, remote working and learning, and much more. With so many things to worry about, many people overlooked another crucial impact: their credit score. While your credit score may not be top of mind at the moment, how you manage it now can affect your life for years to come. Credit scores can determine your eligibility for credit cards, personal and auto loans, mortgages, and even rental approvals and certain jobs. Let’s examine what steps you can take to prevent your credit score from suffering during the pandemic.
- Understand what affects your score
It’s important to know exactly what impacts your score so you can avoid it. For instance, being gainfully employed or completely unemployed does not affect your score at all, while just one late payment will remain on your credit report and negatively affect your score for seven years. So, remember, your credit score is based on payment history (35 percent), credit utilization (30 percent), credit history length (15 percent), credit mix (10 percent), and new credit (10 percent).
- Make at least minimum payments and make them on time
While minimum payments aren’t ideal when it comes to paying off debt (because a large portion of that payment is going to interest, not principal), paying this minimal amount on time every month is essential to maintaining your credit score.
- Ask for help
What do you do if you can’t afford to make minimum payments? Contact your creditors and lenders. While under normal circumstances they may not be able to accommodate your circumstances, many have COVID-19 relief programs that may lower your interest rate or pause or decrease your payments for a fixed amount of time. As these programs are at the discretion of your creditors and lenders, it’s essential you contact them to confirm what is offered before you stop making payments.
- Talk to your landlord or mortgage company
Missing rental or mortgage payments will not only hurt your credit score, it can cost you your home. Your first step is to see if paying your rent or mortgage is covered under the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was created to provide relief options for borrowers with federally backed mortgages, including mortgage forbearance for up to 12 months. If your rental isn’t covered, you may still have state-enacted options. Consult your state's attorney general website to see if you are eligible.
- Keep on top of your credit reports
Even if you’ve done everything right and have no reason to worry that your score will decrease, it’s vital that you check it regularly. Things like creditors claiming you missed payments that you made on time, new credit inquiries that you didn’t request, and potential identity theft can all be monitored, reported, and disputed if you take the time to review your credit report often.
Now that you understand how to mitigate COVID-19’s potential negative impacts on your credit score, you need financial solutions—like low rates on credit cards, loans, and mortgages—that help make managing your credit easier. Find it all (and more) at FirstCapital Bank of Texas.