The COVID-19 pandemic has been the greatest economic challenge the globe has faced for decades, if ever. Social distancing rules have forced businesses to close, meaning lots of workers are receiving less pay than usual or relying on government support.
The USA is one of the countries with the most virus cases and has reportedly lost 10 years of job gains, with many now filing unemployment claims.
Despite personal incomes falling, outgoings remain the same for people who are locked into contracts, payment plans and tenancy agreements. This has resulted in missed payments and families struggling to make ends meet.
The bottom line is that COVID-19 may be weakening your credit score. But there are things you can do to help.
But First, What Is a Credit Score?
A credit score is a rating of how you handle personal finances. If you handle your financial affairs well by paying bills on time, then your score is likely to be good. On the other hand, if you miss payments or struggle to repay the full amount, your score will decrease.
This shouldn’t be confused with borrowing money. Sometimes debt is good and with timely repayments on debt your credit score can improve, helping you to successfully apply for more credit if needed.
Lots of people have heard of a credit score but many do not know what is classed as a good or bad score. For more details on the actual score and what it means, as well as information on the nasty side of a low credit score, check out this helpful credit score guide.
How COVID-19 Can Affect Your Credit Score
If not paying bills on time or paying back the right amount to creditors will harm your credit score, it is easy to see how COVID-19 may be responsible for weakening yours. If you have lost income and are missing payments as a result, your score could be deteriorating.
During the current period, it is not possible for most people to increase their personal income. But they can cut their outgoings and expected payments. This is the area to target if you want to protect your credit score during COVID-19 – and ease financial worries.
So, What Can You Do About It?
The best thing to do when trying to protect your credit score right now is to postpone or reduce the payments you need to make. To do this, you can:
- Speak with your landlord or estate agent
- Ask the bank for a mortgage repayment holiday (more on this here).
- Ask creditors to lower repayments or postpone them for a set period
- Talk with utility bill suppliers for payment breaks
Many of the above will have put measures in place to help their customers. Most of these will not affect your credit score – but you should always ask! Always explore your options to protect your finances and prevent your credit score plummeting during this difficult time.