Credit Scores: Protection during the Pandemic

Joe Merante, Regional Director of California, Continental Credit

For many facing layoffs or other income losses, the first step towards long-term healthy credit lies in figuring out how to stay afloat today. If you’re already facing financial uncertainty, reach out to your credit card issuer to request assistance; many issuers have personalized solutions for cardholders facing hardship due to the coronavirus outbreak. And if you’re in a position where you’re able to prepare, put your extra funds to good use now to set yourself up for security over the next several months.

Here are some ways you can begin to safeguard your credit and deal with the unique challenges of this pandemic’s impact going forward:

Two of the most influential factors that make up your FICO Score are payment history (35 percent) and amounts owed (30 percent). These factors help lenders determine whether you’re able to make payments on time and in full, and you haven’t overextended yourself by taking on large balances you’re unable to pay off. They are indicators of your default risk on payments. Missing payments and using most of your available credit tell potential lenders that you may be at a higher risk of default, decreasing your score. Even when facing economic hardship, doing what you can to make minimum payments on time and avoiding racking up large amounts of debt on your cards can go a long way in keeping your credit score healthy.

“As you work to manage your finances during these hard times, prioritizing on-time payments and keeping credit card balances low to help limit the impact to your credit score,” says Amy Thomann, head of consumer credit education at TransUnion. “Again, it’s better for your credit score to make minimum payments instead of no payments at all.”

A history of missed payments can have long-term effects.

“If you’re only a few days or a couple of weeks late on the payment, and you make the full late payment before 30 days is up, lenders and creditors may not report it to the credit bureaus as a late payment,” says Beverly Anderson, president of global consumer solutions at Equifax. And if you miss a payment by 30 days or more but you can pay it before your next due date, your lender should report your account as current. However, she says, the already-reported late payment will remain on your credit report for the standard seven years. If you’re worried about missing payments or taking on debts, reach out to your issuer for assistance sooner rather than later, so you can avoid negative information appearing on your credit score altogether.