Steps That Can Help Keep Your Credit Score Higher

By Britt Erica Tunick

Despite the financial difficulties that COVID-19 has created for countless people and small businesses across the country, on average, credit scores in the U.S. actually improved throughout 2020. But as the pandemic lingers, there are several things you should be aware of when it comes to keeping your credit score up.

According to Experian, the average FICO score, which is the basis for more than 90% of lending decisions in the U.S., hit a record high of 710 in 2020, up seven points from the previous year. While that may seem surprising, given the financial hardships that pandemic-related job losses have created for millions of people, the need for social distancing has significantly curtailed much of the spending people previously did on their credit cards.

With vaccines now being distributed, and hopes for a return to some sort of normalcy in the foreseeable future, there are several things you should be aware of regarding your credit score. Following are a few of the things to keep in mind:

• Make sure to pay bills on time, as failing to do so can not only open you up to potential late fees but it can also significantly harm your credit rating. If the craziness of working from home or managing the routines of children who are attending school remotely has made it hard to stay on top of things such as paying bills, consider utilizing the auto-pay feature that most creditors provide.
• If you are dealing with financial difficulties related to the pandemic, reach out to your creditors, and see if you can work out some sort of arrangement ―whether that means a temporary increase in the amount of credit they extend to you, or an extension on the amount of time you have to make payments. While there is no guarantee that your creditor will do either of these, it can’t hurt to ask, and many card issuers and companies have been actively working with people during the pandemic to provide help where possible.
• Keeping a balance on credit cards not only means you will ultimately end up paying more for whatever you have purchased through compounded interest, it can also harm your credit rating. That is because 30% of your FICO score is determined by how much of the credit available has actually been used. Lenders view individuals who max out a credit card or keep high balances as higher risk, based on the likelihood that they will eventually be unable to pay down the debts they have amassed. Financial advisors suggest keeping your overall credit utilization under 30% to avoid negatively impacting your credit score.
• Do not automatically cancel or get rid of any credit card that you aren’t using. While that may seem a logical thing to do, particularly if you are paying an annual fee for such a card, it isn’t always the wisest step to take. The length of your credit history determines 15% of your credit score, so if you are going to cancel any unused cards, don’t cancel the ones you have had the longest. If a card you have had for a long time is among those you don’t use, consider adding one or two automated payments to that card to keep it active. If there is a fee tied to it, reach out to the issuer, and see if you can work out a lower fee option, or can downgrade the card to a different one that doesn’t involve an annual fee.