The Credit Dude on Maximizing Your Credit Score During COVID-19

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Jose Rodriguez aka The Credit Dude with his family
Jose Rodriguez aka The Credit Dude

The coronavirus hit us hard and we were not prepared for people losing their jobs, not having steady income, not knowing where their next paycheck was coming from, and what would happen to their credit.

Luckily, Congress passed The CARES Act which protected consumers from negative reporting as long as they contacted their creditors and worked out an accomodation to either defer or extend payments. But there are a lot of people that didn’t do that and their credit suffered tremendously as a result. Fortunately Jose Rodriguez, aka The Credit Dude will break down a few things that you can do to maximize your credit scores to get back on track.

  1. Call Your Creditors

Do not ignore emails, phone calls, or letters regarding past due accounts. Now is the time to see what is available to you and if they are still offering any accommodations. If you just ignore accounts that you have to pay and don’t mention that you were affected COVID-19, then you will not be able to take advantage of any courtesy adjustments when it comes to late payments or even interest that is charged.

It’s always best to pick up the phone and see what is available and for how long. Even a 2 or 3 month deferment on a car or mortgage, can allow you to breathe and pay off other accounts or build a nest egg for the future. Just make sure you ask if they will require you to pay the deferred payments in full or if they can put on the back end of the loan once you are out of the accommodation period.

  1. Apply for a Personal Loan

Applying for a personal loan at your local credit union can give you a big advantage because you can pay off all of your credit cards and just make one monthly payment to your personal loan. This will keep the credit cards open but transfer the debt from revolving to installment which will raise your credit score.

Make sure that you do not apply for a 60-month loan and keep it short, like 24 or 36 months. The last thing you want to do is take out a loan for 5 years and then max out your credit cards again and be in an even worse position than before.

  1. Ask for Credit Limit Increases

The higher your credit limits, the higher your credit score can be if you have low balances on those credit cards. If you are able to get approved for the personal loan to pay down your credit cards or if you can pay down your credit cards on your own, try to ask for a limit increase once the balance is under 30% of the credit limit.

This will increase your available credit which will contribute to maximizing your credit score. Credit utilization or the amount you owe on credit cards compared to the available credit, is 30% of your credit score, or roughly 165 points.