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4 Practical Tips That Can Help You Manage Your Credit During and Post-Pandemic


According to CNBC, 64% of surveyed Americans reported that their spending habits had changed as a result of the pandemic.


And if you stop and think about it, that number just makes sense.


Many Americans went from having food on the table, a roof over their heads, and steady paychecks to dipping into savings, relying on unemployment insurance, and fighting to cover rent seemingly overnight.


So it all begs the question:


How do you navigate financially in the midst of a pandemic? What can you do to keep your credit score afloat in the aftermath of COVID-19?


Here are four practical pandemic credit management tips that can help you maintain or maybe even improve your credit score both during and after the pandemic.



Tip #1: Defer Payments Where Possible


If you're one of the Americans who suffered a job loss or had to file for unemployment in 2020, then you already know about the pressure that comes with being spread too thin financially.


And when you're feeling the financial pinch, being able to skip a mortgage or rent payment can make a world of difference in two ways:


First, because if you can save a solid four figures while figuring out your employment situation, there's nothing wrong with that. And secondly, because your payment history accounts for 35% of your credit score.


As a result, your credit score is better off if you work with your bank or your other creditors to defer payments you can't afford as opposed to letting late payments appear on your credit report.


Tip #2: Consider Carrying Slightly Higher Credit Balances


If you're the type of person who has traditionally paid your credit card off in full every month, this one might seem a little bit strange. And if you're more or less looking at this tip and thinking, "How does a higher credit balance help me maintain my credit balance?", then you'll definitely want to keep reading here.


When you get right down to it, the general financial rule of thumb is that it's okay to lean a little more heavily on credit during emergency situations. And, depending on how much belt-tightening you've had to do over the course of the pandemic, this very well could be the textbook definition of financial emergency.


While your credit utilization ratio may account for 30% of your credit score, if your creditors report monthly you should see your improved balance reflected in your credit score fairly quickly once your finances return to normal.


Tip #3: Consider a Credit Card Balance Transfer


According to Wallethub, the average credit card interest rate can range from 14.58% to 17.87%.


When you're working hard to make every dollar count, those interest rates can be the difference between getting stuck on the interest payment treadmill and being able to put a dent in your debt situation even while you're figuring out your financial strategy.


If you're able to qualify, a credit card that has a low-interest or no-interest promotional period can go a long way towards helping you stretch your minimum payments a little bit further. And the more debt you're able to pay down, the better that looks for your credit utilization ratio.


Tip #4: Stick to Minimum Payments if You Can't Afford Anything Else

The conventional wisdom in personal finance is that if you want to fast track yourself to freedom from debt, your best bet is to go above and beyond the minimum payment.


Here's why:


A $500 credit card may allow you to pay $20 a month. But at that rate, it would take you over two years to pay the card off in full. And that's before you start calculating your monthly interest payments.


During the pandemic, that extra $50 here or $100 there may be better off left in savings. But if you can manage those minimum payments, you can at least maintain a solid payment history on your credit report.


Conclusion


The pandemic has been a difficult financial time for a lot of people. In America alone, folks have suddenly had to dip into their savings, spend on credit cards, and apply for new positions like never before.


Whether you're still in the thick of the pandemic or you're starting to see some light at the end of the tunnel in your region, the four tips we just listed are practical ways that you can manage your credit score. If you make a point of using some or all of them, you have a good shot at coming out of the pandemic with your credit profile in good shape.