Credit is a topic that is misunderstood by many people – what it is, how to leverage it and how to improve your credit score in order to open up more opportunities. When the pandemic hit, many people were not prepared. Countless jobs were lost, many people without savings or a steady income and the fear of not knowing where their next paycheck was coming from – and what would happen to their credit.
Fortunately for many, Congress passed The CARES Act, which protects consumers from negative reporting, as long as they meet certain conditions to either defer or extend payments. Unfortunately there were many that didn’t do this, and their credit suffered enormously as a result.
Credit expert and founder of Got Credit?, Jose Rodriguez, aka The Credit Dude, knows exactly how to solve these problems when it comes to credit, and here he shares his top 5 tips for maximising your credit score during COVID-19.
- Apply for a Personal Loan
A great way to get a distinct advantage is to apply for a personal loan at your local credit union. This can give you a large advantage as you can pay down all of your credit cards, and then make just one monthly payment to your personal loan. This keeps your credit cards open, however it transfers the debt from revolving to installment – which will increase your credit score.
Ensure that you don’t apply for any long-term, 60-month type loans. Be sure to keep it short, around 24 or 36 months. You do not want to take out a loan for 5 years and then proceed to max out your credit cards again, and end up in an even worse position than before.
- Call Your Creditors
Always answer and respond to emails, phone calls, or letters regarding past due accounts. Now is the perfect time to see what is available to you. Also find out if they are still offering any accommodations. Ignoring accounts that you are supposed to pay and not mentioning that you were affected by COVID-19, is a surefire way to not be able to take advantage of courtesy adjustments, in regards to overdue payments or even interest you’ve been charged.
Best practice is to always pick up the phone and see what is available and for how long. Even just a short few month deferment on your car or mortgage, can give you the breathing room to pay off any other accounts, or even to build a nest egg for the future. Always ask if it is required for you to repay the deferred payments in full, or if they’re able to put it on the back end of the loan – once you’re out of the accommodation period.
- Rent Your Car on Turo
Turo is a company where you can rent your car out to people and get paid for it. This can go towards covering your monthly payment, and perhaps even making more money, to cover other expenses you may have. “Some of my friends have 2-3 cars on Turo, and not only are their car payments covered, but they are able to use anything extra to cover their water, cable and electric bills” Jose explains.
Download the app or check out their website to see their reviews, and also to look at what type of other cars were rented out in your area – to give you a good idea what your car is worth rented out. If your car payment was $400 a month and you rent out your car for around $50 a day, what happens when you rent it out for a whole month? You will make an extra $1,500 a month – just for renting out your car.
- Ask for Credit Limit Increases
The higher your credit limits, the higher your credit score can be – provided your balances on those credit cards are low. If you are approved for a personal loan to pay off your credit cards, or if you’re able to pay down those credit cards on your own, ask for a limit increase once the balance is under 30% of the credit limit.
This increases your available credit, which contributes to maximizing your credit score. Credit utilization or the amount you owe on credit cards compared to the available credit, is 30% of your credit score, or roughly 165 points.
- Open a Business
If you have any kind of special talent or a hobby, you can make some money. COVID-19 has shown that we always need to have a back up plan, because you never know what may happen in case something like this happens. You can make practically anything nowadays and sell it on Etsy, Amazon or Let Go. “I saw someone going to garage sales and buying this for a few bucks and then selling them on Ebay for a lot more and making an amazing profit. Even if you make bracelets, facemasks, or even over a service like laundry, haircuts, or even cutting hair, that can help you start your own business” Jose explains.
This could help to generate an extra $500 or more per month that could go towards paying off your credit cards or other debt on your credit report. Every penny matters when it comes to paying off debt. It helps to both maximize your credit score and also save you money interest if you are able to pay it off sooner.
These are 5 tips that can help you maximize your credit score and get back on track after COVID-19. Make sure you follow Jose on Instagram at @thecreditdude where he shares motivation and daily advice on how to master your finances and improve your credit. Or you can visit his website here to learn more.