Despite everyone’s best guess, consumer credit scores have increased during the coronavirus pandemic, according to a recent story published in The Wall Street Journal.
Experts attribute the uptick to the government’s stimulus relief package and the payment deferments lenders and credit card companies granted customers who lost their jobs or fell on hard times as the pandemic got underway. Millions of Americans are also surviving on unemployment benefits, meaning they can keep a better handle on bills without worrying about falling deeper into debt.
Although credit scores are going up, analysts say the trend may not last if lawmakers don’t reach a new stimulus deal as the economic recession stretches into next year.
We’re staying focused on the positive stuff, though. If your credit score has jumped and you want to keep it that way, here are some things you can do.
Keep paying your bills on time
We can’t stress enough the importance of making payments on time. Your payment history is the most influential factor credit scoring models look at when calculating your credit score. That’s because how often you make timely payments demonstrates your ability to manage debt, which helps build trust with lenders willing to let you borrow money.
A habit of missed payments makes a huge dent in your credit score and catching up can be tough, especially if you’re juggling high-interest debts like credit cards. If you’re worried about keeping track of what you owe, we’ve added a helpful new feature in My LendingTree that allows you to see all your upcoming payment dates. Sign up for My LendingTree and connect your bank account to your LendingTree account so you never miss another payment. Even better: It’s all free.
Keep your balances low, too
Do your best to avoid carrying high balances on your credit cards month-to-month, which can signal to lenders that you may have trouble managing your debt load. And because credit scoring models reflect lender confidence, high balances can drop your credit score if it seems that you’re not managing your debts well.
Keep in mind that you want to maintain a rather low credit utilization, which describes how much credit you’re actually using in relation to how much you have available to use. Just because you have a $15,000 credit limit across three credit cards doesn’t mean you should carry that big of a balance each month. Remember, you have to repay whatever you spend, so it’s best to only charge amounts you know you can repay fairly quickly. Making minimum monthly payments is fine, but if you can pay off the full amount, do it. (Side note: Just making minimum monthly payments makes you susceptible to the issuer’s variable interest rate, which can make paying down your debt more expensive.)
Keep old credit cards open
This might seem a bit counterintuitive. Why keep old credit cards open if they’re inactive? Won’t they just sit on your credit report?
Yes, and that’s a good thing.
Credit scoring models evaluate the average age of your accounts when determining your credit score. Even if you’ve paid off a credit card with no plans to use it again, keep the account open so it augments your credit history. A lengthy credit history shows lenders you’re adept at handling credit over a long period of time, which increases their trust in your ability to manage loans in the future. That will keep your credit score pretty healthy.
Keep watch over your credit report
What shows up on your credit report directly affects your credit score. The report isn’t flawless; mistakes can appear, and it’s up to you to catch them before they cause too much damage. That’s why you should monitor your credit report often, so you can take action when something’s not right.
Download the LendingTree app for unlimited access to your credit report and score, along with instant alerts whenever something changes. Stay in the know about your credit situation, so you’re never caught off guard when your score goes up or something new appears on your credit report. You can also dispute errors on your credit report, too, which will help keep it tidy and free of blunders that could harm your score.
Keep your debt under control
Easier said than done, we know. But keeping a tight grip on your debt so that it doesn’t get out of hand will keep your credit score on the rise. Some things you can do include limiting how much you charge on credit cards, making more than the minimum monthly payment on balances you owe, paying off lingering high-interest debt and remaining conscientious about how many times you’re applying for a new loan or credit, which are hard inquiries that may drop your score by a few points. Also, understand that debt isn’t the end of the world. Having too much can be risky, but the key to successfully handling a fair amount of debt is managing it well.
There are tons of other strategies to help keep your debt in check. Find them with our free debt guide, which is chock-full of proven strategies and techniques for reducing and eliminating debt, no matter your financial situation.