Here’s What COVID Has Done to Your Credit Score
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During the coronavirus pandemic, have you put a purchase you couldn’t afford on your credit card? Did you pay rent with your card or fail to pay a bill at all? If so, you’re not alone. According to a new study from Bankrate, 33% of credit cardholders in the U.S. have done at least one thing that could hurt their credit since the beginning of the COVID-19 crisis in March.
How Have People Hurt Their Credit?
The Bankrate study discovered that:
17% of U.S. adults took on more debt
12% paid a bill late
8% carried a balance in hopes of improving their credit score
6% didn’t pay a bill
3% canceled a card to improve their credit score
Who Is Hurting Their Credit Score the Most?
Among the three surveyed age groups – baby boomers, millennials and Gen Xers – 43% of millennials have done something that potentially jeopardized their credit score. Comparatively, 39% of Gen Xers and 24% of baby boomers did the same.
Only 14% of baby boomers took on more debt in that same time frame, compared to 21% of millennials and 20% of Gen Xers.
Additionally, 17% of Gen Xers, 14% of millennials and 9% of baby boomers paid a bill late.
Are Cardholders Educated About Credit?
Some cardholders surveyed reported that they might benefit from more education on how credit actually works. For instance:
22% don’t understand how having a balance will affect their credit score
26% wrongly believe that canceling a card can’t lower their credit scores
52% don’t know what happens if you enroll in a lender’s hardship program
The study also discovered that only 28% of cardholders have checked their credit score since March. Survey results also showed that:
12% say their score has gone down
16% don’t know what’s happened to their score
19% say their credit score has improved
53% say their credit score is about the same
Moreover, only 13% of cardholders say they are worried their score will decline.
How to Maintain Your Credit Score During Coronavirus
Even if you’re struggling to pay your credit card during coronavirus, there are ways you can ensure your credit score stays healthy or even improves during a recession.
Never cancel a credit card, even if you don’t use it much anymore. Closing a credit card reduces your available credit limit and might lower your credit score. You generally shouldn’t close a credit card unless there’s a good reason (like a divorce or an annual fee card you don’t get value from anymore).
Keep your credit utilization rate under 30% of your credit limit. Credit utilization is a term that describes the connection between your credit card limits and balances. If your balance-to-limit ratio starts to climb on your credit report, your credit score may go down as a result.
Pay your bills on time, even if you’re just paying the minimum balance. If you can’t pay your bill, request a forbearance agreement with your credit card provider. Then, you can push off payments until you’re able to cover your bill once again. Read our guide to paying off credit card debt during a recession for more in-depth guidance.
Monitor your credit reports. It’s a mistake to sit back and assume that your credit reports contain accurate information. Credit reporting errors are common. If errors appear on your credit report, they might lower your credit score even though you did nothing wrong. Services like Credit Karma and Experian both provide free credit report monitoring.
Consolidating Credit Card Debt With 0% APR Offers
If you have outstanding balances on your credit cards, this could be a good time to consolidate and pay them off, if you’re able. Opening a new card with a 0% balance transfer offer allows you to combine balances from other cards into one new card. However, only use credit cards if you can pay off the balance in full every month. Doing so helps you avoid paying any interest charges.
Credit Repair Services
Errors and negative marks on your credit report can wreak havoc on your credit. The best credit repair services can help piece your credit back together by reviewing your credit reports and contesting negative marks on your behalf. They work with creditors and the major credit bureaus to clean up your reports, which can significantly raise your credit score.
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