4 Steps to Improve Your Credit Score Post-Pandemic

Covid-19 infected the economy with lay-offs, downsizing, slower business, and a shift in the market. From homeowners to business owners, everyone was impacted by the change. 

Many people made do with sudden changes in the economy that affected their wallet, whether it was applying for a loan, utilizing the forbearance or moratorium, or paying the minimum payment on their credit card.  

If the pandemic led you to rely heavily on your credit lines to make payments, we understand. For many Americans, keeping their loved ones safe, supporting family, and focusing on health & wellness took precedence.  

Now that we find ourselves on the tail end of the pandemic where businesses are reopening, and the economy is picking back up, life resumes. 

So how do you correct the impact of Covid-19 on your credit standing?  

Why your credit score may be hit during a downturn 

It is easy to stay on top of debt when you have a steady income, but reduced pay can make it difficult to pay your bills. Economic shifts can easily make downsizing a reality. Especially since the workplace now favors virtual work and downsized office space.  

If you found yourself making late credit card payments in the last few months, you probably noticed the hit to your credit score as well.  

If you rely on your credit card to make ends meet, then the resulting high credit utilization ratio can tank your score. 

Some individuals have been applying for loans or new credit cards to meet their expenses. This can affect credit as well – because each credit application leads to a hard inquiry that shows up on your credit report. 

So, what can you do about it?  

Here are 4 principles that will improve your credit score post-pandemic: 

The first thing is to avoid doing those things that result in credit score damage. 

It’s important to maintain your credit score that way your finances do not snowball into larger issues. 

1.Pay at least the minimum due on time: 

It may not be possible for you to pay your credit card bills in full, but you should at least pay the minimum due on time to avoid having late payments on your credit report. 

Your payment history makes up about 35% of your score so it’s important to consistently make payments on time. 

However, consistently paying just the minimum due may cause debt to pile up, so you may want to consider a balance transfer card to ease up some of that interest burden.  

However, if you go that way, make sure you have a concrete plan to pay down the entire balance before the promotional period is over. Else you may find yourself in even more hot water. 

2.Keep credit utilization low: 

Those who’ve suffered pay cuts may be using credit cards to cover basic expenses.  

However, excessive use can lead to an increase in the credit utilization ratio. Keep the proportion of used credit to available credit below 30% at all times, or it will hurt your score. 

If you can’t avoid the use of your credit card, try and get your issuer to increase the credit limit. 

Or you could ask a family member to add you as an authorized user on their card – this would also give you some breathing space as far as credit limits are concerned. 

3.Check your credit report: 

Sometimes errors or mistakes on your credit report can negatively impact your score. That is why you must scan your report at regular intervals and dispute errors, if any. 

www.annualcreditreport.com gives you access to three free credit reports every year. Stay on top of mistakes, frauds, and scams to protect your report and score. 

Reach out to the credit reporting company using a dispute letter that clearly identifies each item in your report that you want to dispute.  

Layout the facts of each inaccuracy and request a correction.

4.Managing expenses during a downturn 

If you can keep expenses to a minimum, then you can pay your bills in full even in times of reduced income. 

Consider creating a budget – this will help you cut down on unnecessary expenses and keep spending within income limits. That way, you won’t have to rely on a credit card to meet your day-to-day expenses. 

An emergency fund can also work wonders during hard times. During times of reduced income, you can rely on the fund instead of your credit card to make ends meet. 

Hopefully, you already have an emergency fund in place – if not, then create one as soon as possible. Just put aside what you manage to save each month – once your fund contains about 3 – 6 months of essential expenses, you can rest knowing that you’re covered for at least that amount of time. 

If you can’t create a fund through savings, try adding to it by selling items you don’t need like furniture or electronics. You could also put in gift money here – or any extra money you earn through a side hustle.  

Improving your credit score post-pandemic may initially seem impossible. Despite how intimidating credit score improvement seems at first, taking it step by step is a manageable process. 

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