COVID-19 Impact | Best Ways to Maintain a Healthy Credit Score

The last year saw a number of individuals losing their sources of income and being affected financially one way or another. Although relief measures in the form of moratoriums were announced, the impact of COVID19 may be felt for much longer.

While the economy is slowly recovering, it is important for individuals to focus on ways to improve their financial standing including the ability to procure credit more easily. This can be done by improving their credit score to suit the needs of a post COVID19 credit application.

Lenders have become a lot more wary and cautious about accepting applications, therefore having a high credit score i.e., above 700 is imperative for individuals. With this in mind, we have curated 5 of the most important steps that one can take to prep their credit score effectively.

1. Pay off all Debts on Time

If there is one step that guarantees a high credit score, it is paying off all dues on time and in full. Even a slight delay in repayment or failure to pay the amount itself has a significantly detrimental impact on your credit score. Certain individuals also pay only the minimum balance due instead of the entire amount which again results in their credit score getting affected negatively. 

2. Avoid Multiple Loans or Credit Lines At the Same Time

Opting for multiple loans simultaneously may seem like an indication that the borrower is credit hungry and results in a lower credit score. Having to repay multiple loans simultaneously is difficult as well unless he/she has a large income. Additionally, with COVID-19 having affected most individuals financially, procuring too many loans is not advised. 

3. Do Not Close Old Credit Cards

While it seems logical to close an old credit card that is no longer in use, this can result in the loss of a long line of credit. Longer credit lines are an indication of a trustworthy borrower. Therefore, lenders readily accept applications from borrowers who have been availing credit for a longer period of time. The caveat, however, is that these loans or credit will also have to have been repaid on time. Therefore, if you have a credit card that is quite old, don’t close it just yet.

4. Prevent Overutilization of Credit

While loans are availed for a specific amount based on the requirement, credit cards work a little differently. Although there is a set limit, individuals are advised to use 30% or less than this limit and ideally not over 50% of the limit. Doing so is an indication to the lender that the individual is credit hungry and this in turn negatively impacts the credit score.

5. Check Your Credit Report Regularly

Your credit report is a summary of your credit activity and is based on the loans and credit that has been availed previously. This report also forms the basis of your credit score. However, there have been cases wherein there were errors in the credit report which can again detrimentally affect your credit score. Checking your credit report regularly ensures that there are no errors and also helps you stay on top of your finances.

In addition to the above-mentioned points, other steps such as choosing credit cards with care, not using credit cards to withdraw cash, not procuring multiple unsecured loans can help improve your overall credit score.

Your credit score is an indicator of your creditworthiness and determines your eligibility criteria as well. Despite any financial difficulties that may have plagued your credit score, it can always be improved. Being credit savvy is necessary today and the steps given above are some of the foolproof ways to ensure a high credit score that will guarantee a successful post -COVID-19 credit application.