How do you keep your credit score consistent while dealing with the financial side effects of this pandemic?
The Coronavirus pandemic has not just affected many physically and mentally, but it has drastically affected our financial lives. When it comes to credit, making decisions on what to pay and what not to pay are crucial. One late payment may drop your score by 50-100 points alone, so we need to be careful when making a choice on how we handle our credit portfolio.
Luckily, many creditors have been flexible with their customers when it has come to payment challenges. If this is a challenge you may be facing, please know there are options out there that may be suitable for you. Depending on the type of loan or credit card you may be experiencing difficulty in paying, your best option is to contact the creditor as soon as possible. What may be offered is some sort of deferment or payment forgiveness. If those options are not feasible through your creditor(s), you may want to ask them if there are any pandemic exceptions on late fees just in case a situation arises.
When it comes to credit, being diligent and staying aware of fluctuations in your score is important. Here are three basic tips to reference when trying to maintain your credit score, even throughout a pandemic:
- Try to pay off your lowest balance accounts first. Sometimes this is called the “snowball” debt payoff structure. This debt payoff plan recommends you utilize those funds you’d otherwise use to make those payments, and put it towards your higher balance accounts. For each account you payoff, you will have additional money freed up to pay off your larger accounts.
- Keep an eye on your credit utilization. When it comes to Lines of Credits and Credit Cards, you need to keep an eye on your utilization. What credit utilization means is the ratio of what you are using in comparison to the credit limit for that specific account. If you have a $10,000 credit card and have an active balance due of $5,000, you are therefore utilizing 50% of your credit on that card. In order to maintain a healthy credit score, many creditors look for utilization to be under 30%.
- Be responsible and diligent on new accounts you apply for. Inquiries stay on your credit for 2 years, so you may need to be careful with how many new accounts you apply for in a short period of time. Although creditors may look at inquiries made within a 10-15 day timeframe to acknowledge you may have been “rate shopping”, staying aware of how many accounts you apply for will help you maintain your credit.
All in all, don’t let this pandemic cause you to panic about your credit. You can maintain that score you worked hard for by just making some adjustments, and I honestly know it takes years to build and maintain a good score so it is worth every ounce of effort.. By following the three steps listed above, and maintaining on-time payments, your credit should be able to stabilize and remain consistent.<p value="<amp-fit-text layout="fixed-height" min-font-size="6" max-font-size="72" height="80">For any questions on credit, please let me know!