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Posted by: Charles P Myrick CPA Posted on: Sep 07 2021 Posted in: personal finance, Pandemic, credit score

Fear a Pandemic Blow to Your Credit Score? Here's What To Do

There’s no question that the pandemic has affected the finances of many people. Going through possible job loss or reduction in business productivity has made paying bills on time a challenge. Even with government interventions for rent and payroll assistance, it’s likely that the credit scores of many people took a hit this year.

Everyone benefits from doing periodic credit checks. But, if you find that your credit score is lower than you expected, don’t despair! There are steps you can take to improve your credit score to some degree, and perhaps even significantly, without waiting another seven years for items to clear. These steps can be helpful for any kind of credit repair, including non-pandemic-related debt or financial trouble.

First Step to Improving Your Credit Score 

Start by ordering a free credit report. You may have heard otherwise, but checking your credit score does NOT hurt or lower your score. Equifax, Experian, and TransUnion are the three leading credit reporting companies. In addition, Experian offers FICO score reports. Start by requesting your free annual reports from each of the three reporting companies.

  • Check each credit report for accuracy – Check to make sure everything on the report results from actions you took—dispute inaccurate items to get them off your report. There may be identity theft or errors. Clearing them can raise your FICO score while also improving the credit on each report.

Next Steps to Consider

  • Credit card – Sometimes, not having a credit card can hurt you. Have at least one that can be paid off regularly for small purchases to establish and raise your credit rating. You might need to apply for a prepaid (secure) card to get the ball rolling. Use it for gas and food – regular monthly purchases, but pay it off every month before incurring interest.
  • Get a small loan – Many credit-builder loan programs are run by local banks to help establish credit. You’ll need to prove income to qualify and make the payments.
  • On-time payments – Make sure to pay all your regular monthly bills on time: utilities, rent, loans, or other expenses. Do not allow accounts to be sent to collections! Collection agencies report directly to the big three credit bureaus, which can lower your score.

  • Get out of debt Get on a budget. Any spare money should go toward paying off debt. Pay off past medical or other bills. Put debt payments in your budget, starting with the lowest debt. Once that one’s paid off, use that debt money allotted to attack the next debt until you’re paying off the highest debts. If you have minimum monthly payments for any of the other obligations, don’t stop paying those. Try to get those paid off first.

  • Ask a professional to help you develop and maintain a personal financial plan. This may be your best long-term solution to stabilizing your credit and helping you achieve life goals.

Keep Up the Good Work

  • Stay diligent – You can usually check your FICO score for free through your bank, especially if they have an app. Checking it on a regular basis can alert you to new issues or encourage you when it goes up.

  • Stay patient – Remember that while the first few steps may raise your FICO score or help your credit immediately, boosting your score ultimately will take time, especially if it was very low.

Help is Available When You Need It

Myrick CPA knows the value of a good credit score. Many financial processes are easier or yield better outcomes with a higher rating, such as general borrowing or qualifying for increased mortgage amounts and lower interest rates. So whether you need help recovering from a colorful debt past or simply need a breather after a difficult year, contact us today for more information about creating plans for debt reduction and credit repair.