Many people may already be doing this credit-building activity. (iStock)
If the coronavirus pandemic has had an effect on your personal finances — like if you were forced you to max out your credit limit and hurt your credit score — you are not alone. According to the Pew Research Center, the number of unemployed workers grew faster in just three months in 2020 than it did in two years during the Great Recession.
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As a result, many have valid concerns about how the crisis will impact credit card debt, credit history, and other aspects of their personal finances. Each situation is different, but there is one thing that could increase your credit score if coronavirus has had an impact on your credit.
The best way to increase your credit score fast
Using credit cards can be an excellent way to build credit because, despite their relatively high-interest rates, there's a way you can use them without paying any interest at all.
If you're looking to open up a new credit card, use Credible to shop around for different cards — from secured cards to balance transfer cards — and compare card companies instantly. From redeeming rewards to building credit, Credible can help in any situation.
Each month, your card issuer reports your statement balance to national credit reporting agencies. If you have a balance — even a small one — it shows that you’re using your available credit, which helps lenders see how you manage your debts. Pay your bill in full to avoid any interest fees. If you have a rewards credit card, you may be able to use your points and miles or cashback to cover some of your expenses.
By visiting Credible, users can quickly compare the best rewards credit cards available.
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Other ways to increase your credit score
Here are four more ways you can use your credit cards to boost your credit score.
- Pay your bill on time
- Keep your balances low
- Keep unused accounts open
- Monitor your credit
1. Pay your bill on time
Your payment history is the most important factor in your credit score, so paying bills on time is crucial — or at least the minimum amount due every month. If you can, pay your bill in full to avoid interest and other late payment charges. If you miss a payment, you’ll generally have 30 days from the due date to get caught up before it’s reported to card companies.
2. Keep your balances low
Your credit utilization rate — the percentage of your credit limit you’re using at a given time — is an important factor in calculating your credit score. If you’re constantly bumping up against your credit limit, it may be a sign that you’re having a hard time managing your debts. As a result, the lower your credit utilization, the better. If your credit utilization rate is high, consider using a consolidation loan to pay off the debt — by transferring it to a personal loan, your credit utilization rate on the card will drop to zero.
3. Keep unused accounts open
Don't close your old credit cards. These cards are helping build your credit score, even if you never use them. That’s because your length of credit history — how long you’ve been using credit and the average age of your credit accounts — is another component of your credit score. Just keep in mind that some card issuers may cancel your account if it remains inactive for too long. Consider making a purchase every six months or so to keep the card active.
4. Monitor your credit
Your credit report will show you which areas of your credit history need your attention, and with your credit score, you’ll be able to see where you stand and track your progress. With Experian, you can check your credit score and credit history for free.
If you’re looking for a new credit card, use an online marketplace like Credible to get an idea of what’s available based on your credit score and preferences, and compare those options.
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You can also use Credible to compare personal loan rates and get prequalified. The online marketplace can be helpful if you’re thinking about consolidating your credit card debt to lower your credit utilization rate. Enter your loan amount and estimated credit score to find out what kind of rates you qualify for without hurting your credit.
Use Credible’s personal loan calculator to estimate your monthly payments to ensure you're choosing the best repayment term for you.
How to manage your financial health during coronavirus
Using credit cards to build and maintain a good credit score is possible for many. However, credit repair isn't the only way to improve your financial situation.
Here are three other moves to consider:
- Get on a budget
- Fund your emergency savings
- Be wise about debt
1. Get on a budget
If you’re not already using a budget, think about creating one for your household. Even the simple act of writing out where your money goes can help you understand if you can make better spending decisions. It can also help you see where you can reallocate spending to areas of your finances that can improve your situation.
2. Fund your emergency savings
Even if money is tight, you may be able to boost your personal finances by saving a little each month for a rainy day. Look for opportunities with your budget to set cash aside for financial emergencies like the one caused by the pandemic.
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4. Be wise about debt
In some situations, it can be challenging to avoid debt, especially if you’ve lost your job or had your hours cut. However, if you need to borrow money, use an online marketplace like Credible to shop around and ensure you’re getting the best deal. Also, avoid applying for credit unless you need it.
As you practice these and other smart financial habits, you may have a better chance of weathering the storm of the pandemic and coming out the other side on a more stable foundation.
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