How to protect your credit score from COVID

By LESLEY GREGORY

It’s understandable that in times like these some people may find it harder to pay their bills on time or in full. If there’s a hiccup or two, what will this mean for your credit score?

The good news is that many lenders are taking into account the special nature of the disruption caused by COVID-19. That means you’re unlikely to see much change in your credit score simply because you’ve been granted a payment pause or other help, according to Equifax, one of the big credit reference agencies.

“Lenders will pay less attention to these credit scores… during the COVID-19 period and put more focus on understanding your whole situation, such as your income, expenses, and employment status,” Equifax reckons. Lenders won’t list a default while you’re receiving official COVID-19 assistance, it adds.

Credit reference agencies like Equifax, Experian and others compile credit reports that businesses or lenders can use to understand whether you’re a good “risk” or not. They’ve come up with some good advice on what to do if your ability to pay is affected by COVID-19, or another life event.

Pay what you can

You may be used to paying the full amount on, say, your monthly credit card bill. But you’ll keep your credit score clean as long as you meet the minimum repayment.

Pay as soon as possible

Generally, late payments don’t end up on credit reports for at least 30 days. So, try to catch up before then. And there’s a difference between being 30 days late and 90 days late, so even catching up in that later window may help.

Ask for help

If you can’t make even the minimum payment, or pay in reasonable time, don’t be afraid to talk to your lender. There may be options to pause payments, spread them out more, or negotiate a lower interest rate.

Stop the clock

The most important thing about talking to your lender is that it stops the clock. Even in normal times, lenders can’t list a default if you’ve officially asked for help.

There are also some things you can do at any time to tidy up your credit report that will help now:

Limit credit applications

Applying for credit frequently in a short space of time can suggest you’re overly reliant on credit and therefore a higher risk. Each application will be recorded, so don’t “shop around” with multiple applications.

Close unused accounts

Having a large amount of available credit may make lenders think you have too much on your plate. So you may want to close credit accounts you’re not actually using.

Keep an eye out for fraudsters

Keep an eye on your credit report for signs of fraudulent activity, such as a surge in the amount you owe or applications you didn’t make. Alert your lenders, not just to prevent your credit being used but also so they can restore your credit report.

Monitor your credit report

You have the right to access your credit score and credit report for free at least once a year – and you shouldn’t have to pay. Some services now offer quick access through apps.