Coronavirus pandemic has seriously affected the life and the peoples finances since it has started in year 2020.Large number of our countries populaton has lost there job due to pandemic or some of the income for last six months,due to which the people are failing to pay their bills on time.
With the cash flow heavily affected in form of layoffs and salary cuts,the demand for new credit loans has been risen and majorly in form of unsecured loans.However, to enjoy these benefits,one must have a good credit score,especially in corona crisis.
Importance of Credit Score :
The credit score of a person showcases his or her creditworthiness to the bank. If you have taken a loan or a credit card from a bank, paying back the loan in EMIs or paying your credit card dues on time and in full has a positive impact on your credit score. However, any defaults missed payments, etc. can have a negative impact on the score.
In a crisis like the COVID-19 pandemic, if there is a necessity for a loan, having a good credit score is the most important factor. Having a credit score above 750 is ideal and below 700 is below average. Having a high credit score can often help you get lower interest rates on your loans or can also help you choose your desired tenure and amount of the loan as well. However, having a lesser score reduces the chances of these options.
Hence, to avail any of the products launched by banks to help customers during the pandemic, your credit score must remain steady.
3)How to Improve Your Credit Score
Follow these points to improve your credit score amid the pandemic:
Pay Your Bills on Time
Missed or late payments can affect your credit history for up to seven years. Try to pay your bills on time, at least the minimum amount by their due every month, to avoid hurting your credit score. If you miss a payment, it will be assigned to a debt collector after 30 days from the due date. If you can, prioritize paying your bills on time in full to avoid late payment charges or interest. This will help boost your credit score.
Keep Your Credit Utilization Ratio Low
Your credit utilization ratio or the credit limit is a crucial factor in calculating your credit score. Make sure you keep it under 10% to avoid hurting your credit score. If your credit utilization ratio is high, consolidate a loan to pay off the debt for a better credit score.
Keep Your Unused Accounts Open
Do not close your old credit cards even if you do not use them. The age of your credit accounts and the length of your credit history will increase your credit score. Consider purchasing at least every six months to keep your card active.
Review Your Credit Report
Another way to boost your credit score is regularly review your credit reports to make sure they are accurate and have no errors. This way, you can identify any mistakes or fraudulent activity and report it immediately to the credit bureau before it damages your credit score.
Do Not Apply for Too Many Loans or Credit Cards
Applying for a loan or credit card may require running a hard credit inquiry on your report. Each hard credit check can cost you 2 to 3 credit points. Your credit score can be significantly reduced if you apply for too many credit cards or loans at a time.
Protect Your Identity
Identity thefts and scams are widespread during the pandemic, so it is essential to secure your personal information. Cybercriminals or hackers can use your personal information to open your credit accounts, make purchases, borrow money, and transfer funds. If left undetected, this activity can significantly impact your credit score. Work with your creditor to protect your identity and personal information and ensure a better credit score.
Make a Budget and Plan Ahead
Creating a budget is necessary, especially if you are earning less money or temporarily unemployed. Cut down unwanted expenses, suspend non-essential services like lawn care and cleaning, and spend less on takeout. These will help keep your credit card debt low and credit score high.
How to Deal with Creditors If You Cannot Pay
When you are under financial stress and cannot make your loan or card payments on time, contact your creditor and ask for help. Many lenders have announced proactive measures to help their borrowers affected by the pandemic, providing loan extensions, repayment flexibilities, reduction in interest rates, forbearance, etc. You can explain your situation to your lender and ask for an extended period to make payments either in a lump sum or installments.
You can talk to your creditor and know the options available to delay the payments.