Did Covid-19 Affect Your Credit Score? How to Fix it?
Vaccines should accelerate the recovery from the 2020 slump, however, the financial aftermath is evident when observing the rise in bad credit scores. If you are experiencing financial stress, you’re not alone.
Before making any decisions that could affect your credit, it’s essential to get proper information on how the pandemic may have affected your credit score. In this article, we’ll talk about how you can take the reins on your financial situation and improve your credit score in a soon to be post-pandemic reality.
How COVID-19 Caused Bad Credit Scores
While the Covid-19 Pandemic has not had a direct effect on credit, it’s effects on the job market and income loss have had an undeniable indirect effect on low scores. According to McKinsey & Co, as many as 100 million people in eight of the world’s largest economies may need to switch occupations by 2030. Many jobs are gone forever, and countless companies have gone bankrupt, or the sectors have been hollowed out. The number of people struggling for rent, tuition fees, monthly bills, and even grocery spending is much more than pre-pandemic. Because bad credit is often correlated with job loss, income reduction and a lack of emergency funds/savings, it’s no wonder that people are accumulating bad credit.
Looking back at the previous year, we should draw comfort from what did not happen, while also reacting accordingly to what did happen. If you are already a victim of bad credit or you are being exposed to the risk of having bad credit, there are ways to mitigate the adverse effects of this financial burden.
How to Improve Your Bad Credit Score
We are being challenged with widespread long-term unemployment, financial difficulties and mental stress like never before. How long these struggles will last can’t be predicted, however, the longer these problems remain unaddressed, the more likely they are to take over our lives. One way of keeping our problems at a minimum is to keep an eye on our credit score. Here are a few ways to fix your credit score if it’s low:
1. Check Your Credit Score
Obtaining a copy of your credit report is a great place to start. It keeps you from playing a guessing game when it comes to your credit, and gives you a sense of your current financial situation. You can only make financial plans that suit you best when you have a clear idea of your situation.
2. Review All Your Accounts
If you are struggling with your bills thanks to the economic stresses of COVID-19, it’s easy to turn to your credit card to keep up. To fix your bad credit score, you must thoroughly keep track of your accounts and assess how much debt you owe.
Other types of accounts, such as car loans, student loans, and mortgages, should also be reviewed. You should take the time to come up with an exact number of how much debt you owe in total.
3. Make a money managing plan
When you succeed in identifying the trends and patterns that lead to your bad debt, it is then time to make a plan that will keep you from making those same mistakes the next month. Seeking help in creating a money managing plan is also a good idea. You can easily benefit from many resources and save yourself from being on the bad debt expense side of the income statement.
4. Keep Up With Payments
Payment history has a huge effect on your credit score. For this reason, you should try your best to make on-time and complete payments, particularly if you’re concerned about your credit taking a hit due to COVID-19.
If complete payments are not doable, do your best to at least make minimum payments. In general, a partial or minimum payment is better than no payment at all. Furthermore, it can help mitigate adverse effects on your credit score. Do be aware though that you will have to pay interest if only paying the minimum balance.
5. Talk With Your Creditors
During the COVID-19 pandemic, many lenders and service providers have announced that they will offer relief to consumers. If you anticipate that you are likely to miss a payment, contact your lender first. Lenders will appreciate that you’re giving them notice and will be more likely to extend the due date, create a repayment plan and work with your circumstances.
Many believe that the global economy will get back to normal once the virus subsides. This is not the case, as economic recovery will take longer to achieve. If your personal and financial life has been interrupted by COVID-19, bad credit may be something that you’re currently feeling the effects of. Don’t panic! These tips will help you get a better score, ameliorating overall financial stress.