Did your credit score drop during coronavirus?

Credit scores can decline during a financial crisis.

The number of unemployed Americans rose to over 44 million in June as more companies announced additional layoffs due to the lingering impact of the coronavirus pandemic. While employees at some companies have returned to work since the furloughs and layoffs began in the middle of March, the recovery has been uneven.

A major financial crisis can easily lead to the decline of credit scores when consumers miss payments on their monthly bills such as a car loan or credit card. Repairing the damage is possible, but consumers need to be patient since credit scoring agencies look for improvements over a period of several months.

Here are tips on how consumers can prevent negative impacts to their credit score.

Check your credit report on a regular basis

Check your credit report often since it can be done for free every week at annualcreditreport.com, said  Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization. This will help consumers “quickly address any reporting errors that are hurting your credit score,” he said. 


Utilize payment deferment plans

Many people have taken advantage of payment deferment plans with their credit cards and mortgage loans, which can be a “great way to protect your account status and credit score while being allowed to skip payments,” McClary said. “If that plan is not reported correctly, the missed payments could hurt your score and make it appear that you are ignoring your obligation to repay your debt.”


Pay down existing debt

Keep making payments on credit cards even if you can only afford the minimum payment. Your account history comprises 35 percent of your FICO score. Do anything you can to avoid falling behind, McClary said. 


“If you see some payment troubles ahead, talk to your creditors about plans that allow you to skip payments without penalty or reach out to a nonprofit credit counseling agency for guidance,” he said.

Obtain a balance transfer card

Consumers who are not having any difficulty with payments can look for ways to optimize how they are paying down their debt by transferring balances or refinancing to take advantage of lower interest rates and more affordable payments, McClary said.

Either apply for a balance transfer card or a credit card with an introductory offer with a lower interest rate to reduce monthly payment amounts. To see what balance transfer cards have to offer, check out Credible's online marketplace.

“That can save money and make it easier to pay on time, which helps your credit score,” he added.

Consumers can also shop and compare all credit cards on Credible to find the best choice for them.


It's also important to make sure you have a good plan in place to pay off the debt you transferred during the introductory period, said Emanuel Rivero, a director of counseling at Money Management International, a Sugar Land, Texas-based non-profit debt counseling organization. If you don’t have a plan you may have to pay interest on some (if not all) the balance you transferred. 

Avoid closing the old card you’re transferring from, but also don’t use it. 

“Remember that 30 percent of what makes up your score is available credit and keeping that card with little to no balance will help,” he said.

Keep old accounts open

Closing credit cards or other accounts can negatively impact your credit score because it lowers the amount of debt you have access to and increases your debt-to-income ratio. If your older credit cards do not charge an annual fee, keep them open.

“We normally recommend keeping that card open, but being disciplined enough to not use it,” Rivero said.  “With the card open, you’ll have what’s called an additional open ‘trade-line’ on your credit profile and this can help keep a healthy score if managed correctly. Available credit makes up 30 percent of your score and keeping that card with little to no balance will help that cause.”

Improvements to your credit score depend on many factors such as how many accounts you have, how much you owe and the status of past due accounts. An account that is a couple of months past due is a smaller issue and once past payments are made, your credit score will improve fairly quickly, McClary said. “Major delinquencies and judgments appearing on your credit can have a devastating impact that may take months and years to recover from,” he said.


Timely payments and keeping balances at 20 percent or less of the credit limit works wonders for credit score improvement, Rivero said. 

Credit scores can improve in 45 to 60 days if a large lump sum of debt is repaid or if an inaccurate item is removed from your credit profile.  

How to receive free credit counseling

Consumers who lost their jobs or were financially impacted by the coronavirus pandemic can obtain free credit counseling from non-profit organizations.

The National Foundation for Credit Counseling established a service specifically for people who are struggling with debt as a result of the COVID-19 outbreak. This resource connects people with free assistance for budget counseling and payment relief programs and help is also available for housing issues that have resulted from financial hardships. Consumers can access help via the NFCC's website or by calling 844-865-1971.