If your income has been impacted by COVID-19, here are some things you can do to protect your credit score.
Get information about your credit report
According to the government, you are entitled to one free copy of your credit report from each of the credit bureaus. This pandemic has already left millions out of work or dealing with less hours and less income. While things are beginning to open up, many people still may see lasting effects of the pandemic on their finances. Having your report will make it easier to create a plan and course of action. It also lets you check to see if there are any corrections that need to be made, or signs of identity theft.
Pay the minimum
Although it is better to pay credit balances out in full, when funds might be running low, paying the minimum might be better. We know it might be tough to make payments if you have lost your job or hours have been cut back, but it in the long run it is better to make any payment you can, when you can. Late payments can also impact your credit score in a negative way, so it is much better to pay the minimum than to skip a payment entirely.
If you have a loan, see if you can defer or reduce payments
Lots of agencies are offering reduced payment plans and deferrals during this time. Government agencies have issued warnings to lenders to offer forbearance and loan modification options for home loans. It wouldn’t hurt to ask your lender if this is a possibility.
Credit score does not need to be your top priority at the moment.
Although it is a good idea to be aware of the score you have, it is important to remember that credit scores are constantly changing. Monitoring it for changes is fine, but make sure to keep your health, safety and family a top priority.
Consider adding a COVID-19 statement to your credit history
This may protect your current score but it also is a red flag to lenders to not issue additional loans or increase existing lines. That’s because it tells the lender that you don’t have the financial reserves or backup to withstand a 3-6 month cash flow problem.
The bottom line is to keep an eye on things and do the best you can to avoid permanent damage to your score. Don’t hesitate to seek out help or advice from professionals you trust, including an accountant or your local banker.