How you can protect your credit score during the coronavirus pandemic

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Keeping up with your credit score can be a daunting task during the best of times. In the face of current economic uncertainties surrounding the coronavirus pandemic, though, excellent credit may have even more impact on your financial health.

“While, during tough times like this, it is important to have your score as healthy as possible in case you need to get a loan or a credit card to get by, you also can only do the best you can,” says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report.

But 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:

Free weekly credit reports

On April 20, 2020, the three major credit bureaus (Equifax, Experian and TransUnion) made a joint decision to offer Americans free weekly credit reports for the next year to help those facing financial hardship due to effects of the pandemic.

“To help play our part and reduce some of that anxiety, we are uniting as an industry to help people know the facts about their financial data,” the credit bureau CEOs said in a joint statement. “We are making credit reports more accessible more often so people can better manage their finances and take necessary steps to protect their credit standing.”

By viewing your credit report regularly, you can ensure all the information is accurate and up-to-date. Developing familiarity with the payments and accounts found on your report can also help you determine which credit scoring factors you can improve upon to boost your credit score.

You can access your credit reports through AnnualCreditReport.com.

Credit score risks

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 a majority 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.

Issuers help with financial hardship

Reaching out to your credit card issuer should be your first response if you’re having difficulty making payments due to coronavirus.

Many issuers have already stated that cardholders should speak individually with a representative about their situation to work out a personalized solution.

For instance, Citi cardholders may be granted options such as forbearance and credit line, and Goldman Sachs and Apple (the team behind the Apple Card) are allowing cardholders to enroll to skip March payments without accruing additional interest.

Credit score impact

To best ensure you’re aware of the impact these programs may have on your credit long-term, ask your issuer directly at the beginning of the process — don’t wait until you see a hit reflected in your score.

“Discover won’t report late payments to the credit bureaus for the next two months, upon request,” says Ted Rossman, industry analyst at Bankrate. “While that’s the most formal declaration I’ve seen, many other banks are doing similar things on a case-by-case basis. With permission, many customers are skipping payments, sometimes without interest, and getting other fees waived.”

Rossman recommends discussing your credit score directly during the initial call to your issuer.

“The terminology can differ from bank to bank,” he says. “Whether it’s called forbearance, a disaster declaration or something else, ask to be part of a program that will save you money, provide you with flexibility and won’t hurt your credit.”

Take action now

Keep in mind that you’ll need to enroll yourself in any assistance your issuer may offer. If you skip your monthly payment or pay late this month without reaching out to your issuer first, you will see that reflected in your credit report.

“These programs aren’t automatic,” Rossman says. “You need to ask, and with long phone wait times reported, online chat and social media may be better options.”

Follow your plan

After you’ve spoken with your credit card issuer and established a personalized plan, make sure you do your best to stick with it.

“If they do work out a program with you, do your best to make those payments on time,” Harzog says. “Whether it’s a decreased payment or you can skip a month, do the best you can to keep up with that.”

Both issuers and credit reporting agencies are aware of the situation many consumers are in and want to keep you from falling behind your payments.

“When a consumer is placed into a forbearance plan, a deferred payment plan, or some other special abatement program, reporting processes have been created by the credit bureaus to make sure that the consumer’s credit is not treated negatively,” says Rod Griffin, senior director of consumer education and awareness at Experian.

Pay down debt now

If you’re not in immediate risk of defaulting on payments or you have the extra cash flow, now is the time to eliminate high-interest debts which may become even more burdensome as uncertainty continues.

Since credit card rates are generally much higher than rates on mortgages, auto loans and even student loans, credit card balances are those which could make the biggest difference in your total amount owed. Though the Fed cut interest rates to near-zero, credit card interest rates (which currently average above 17 percent) are not expected to drop by a substantial amount.

As you accumulate any extra income or one-time cash payments (like a tax refund or bonus), consider putting it towards your balances and easing your high-interest debt burden sooner rather than later.

Consider a balance transfer

“For some people, this may be a good time to explore balance transfer or introductory credit offers,” Griffin says. “Transferring balances to a lower interest credit card may reduce monthly payment amounts and help you through a difficult financial time. While debt is a financial problem, credit can be a financial tool that can help improve your overall financial health in the long run.”

A card with a long introductory APR period, like the Citi Simplicity® Card, which offers zero percent interest on purchases for 12 months and balance transfers for 21 months (14.74 – 24.74 percent variable thereafter), may be a good option and give you ample time to pay off your balances.

Still, make sure to do your research to determine which card may be best for your individual financial situation.

“If you are planning to explore new credit offers, make sure you understand the terms you are agreeing to,” Griffin says. “Also, remember that if you need to use credit as a financial backstop, be sure to have a plan to reduce and pay off any new debt after this national health emergency has passed.”

Check your credit report

Now is a great time to check your own credit report to become familiar with where you stand and ensure the information is accurate.

“If there are errors on that, they could drag your credit score down unnecessarily,” Harzog says. “Make sure everything is in order, because you want to make sure your score is as high as possible just in case you need credit.”

While you’re generaly allotted one free credit report from each of the three credit reporting agencies (Experian, Equifax and TransUnion) every 12 months, you can now receive a free credit report weekly throughout the next year, which you can access through AnnualCreditReport.com.

“Using your credit report as a financial management tool, much like a monthly billing statement, can help you monitor your financial obligations and ensure you can take action quickly to protect your financial standing,” Griffin says.

Add a consumer statement to your report

Representatives from each of the three credit bureaus suggest that consumers financially impacted by the coronavirus pandemic consider adding a consumer statement to their credit reports making the circumstances clear to lenders.

“Some scoring systems will consider accounts with the statement as ‘neutral,’ meaning they will have no negative effect on that score,” Griffin says.

Under the Fair Credit Reporting Act, these consumer statements may be up to 100 words in length (200 for Maine residents).

“An example of this note might be, ‘I am unable to make payments due to coronavirus,’” Thomann says. “Anyone who views your credit report will be able to see this statement.”

Consider credit counseling

If you’re not sure how you’re going to make your next payment to your issuer and the impact that could have on your credit score, consider guidance from a credit counseling service.

According to Harzog, this may be especially helpful for someone who has taken on large amounts of debt or who was struggling to pay back debts even before the uncertainty of the coronavirus pandemic and has now been impacted even further.

Look into professional, non-profit credit counseling organizations, such as those affiliated with the National Foundation for Credit Counseling.

“Reach out and get a phone call with a credit counselor and just see if they can give you some direction,” Harzog says. “There’s always a phone call you can make, no matter how deep in debt you are.”

Stay informed

As the global pandemic and its economic effects continue to develop rapidly, the best thing you can do to prepare is stay informed.

“You have to keep up with the news and see what’s happening,” Harzog says. “Be sure you read everything that comes from your credit card issuer. Check your mail in case it comes via snail mail. If you get text messages, check those. Be sure that you read all the communication coming from your issuer, because they’re all a little bit different.”

How lawmakers are taking action

On Wednesday, March 18, two members of the Senate Banking Committee introduced a bill which would protect consumer credit scores during the coronavirus pandemic. The proposed Disaster Protection for Workers’ Credit Act would have enacted an immediate four month moratorium on negative credit reporting and provide extended relief for consumers facing hardship due to the pandemic.

In addition, consumers could receive unlimited credit scores and credit reports for a year following the crisis and protections would remain in place for future major disaster relief efforts.

Sen. Brian Schatz of Hawaii, who introduced the bill alongside Ohio Sen. Sherrod Brown, said in a statement: “Our bill will make sure people who fall behind on their bills won’t take a hit to their credit scores. Protecting credit scores now will give people a chance to rebuild their lives and our economy.”

The legislation did not make it into already-passed phases of the stimulus plan, but the lawmakers say they will keep pushing for credit reporting relief for borrowers as the outbreak continues.

As this bill or others involving credit score protections move through the government, Bankrate will update this story.

Continue practicing good credit habits

Even as the impact of the coronavirus evolves rapidly, there are practices that remain constant: the healthy habits that can benefit your score at any point in your credit journey.

“While this is an unusual time for us all, the basic principles still apply when it comes to protecting your credit history and your financial health,” Griffin says. “One of the benefits of credit is that it can serve as a tool to help you through challenging financial times. It’s hard to argue that doesn’t describe what we all are experiencing now.

And if you’re worried about how you’ll pay your bills, the most important thing to remember right now is that you can seek out help, starting by contacting your credit card issuer. Be your own advocate for your financial health.

“Help is available, you just need to ask,” Rossman says. “If you don’t speak up until after you fall behind on your payments, it’s much harder to get that corrected, and late payments can drag your credit score down for years. So be proactive.”