How to Protect Your Credit Health When Money Is Tight

This content is for the first stimulus relief package, The Coronavirus Aid, Relief and Economic Security Act (The CARES Act), which was signed into law in March 2020. Looking for the latest news on the stimulus relief package? For more information on The American Rescue Plan, the stimulus relief package which was signed into law in March 2021, please visit the “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post. 

With nearly two-thirds of Americans feeling financial strain due to the COVID-19 pandemic, it’s an important time to take an active role in our finances. Making financial plans can feel demotivating if money is tight, but understanding your goals is the key to making productive financial decisions. There are typically two key areas of focus when creating a financial plan: growth and protection. Growth isn’t possible for many people right now given the rise in unemployment and reductions in work hours. However, even if your income is unstable, there are still steps you can take to protect your credit health.

Know where you stand

According to week eight of TransUnion’s Consumer Financial Hardship Study, 36% of Americans think it’s very important to monitor their credit score during the current health crisis. They’re absolutely right. Checking your credit scores and reports helps you baseline your credit health and enables you to keep track of any changes to your credit history, which may in turn affect your score.

Accessing and monitoring your credit information is an important part of managing your credit health during COVID-19, so the credit reporting agencies (TransUnion, Equifax and Experian) are offering all Americans free weekly credit reports online at annualcreditreport.com through April 2021. Or you can download a free app like Mint to review and monitor your score.

Now that you have weekly access to your reports, try to schedule a consistent time to check them. Lenders typically report updates to accounts each month, but different lenders may update at different times. It’s important that you make a habit of monitoring your credit regularly.

When reviewing your credit reports, look for any updates you’re anticipating or unexpected changes that may need closer review. Your credit report is a representation of your data identity, and you should manage it as a valuable asset. Just like you, the credit reporting agencies want to be sure all your information is accurate and up to date. This ensures the credit reporting system is fair for everyone. Check your personal information, and go through the open credit accounts listed to make sure you recognize all of them. Review account balances and payment histories to be sure they’re accurate. You may also want to note the contact information for each of your lenders. If you have a question about a specific item on your report, it may be a good idea to contact your lender directly to get more information. You can also submit a dispute with the credit reporting agency that issued the credit report to request an investigation of anything you believe is inaccurate.

Continue making payments

Your payment history is such an important factor in calculating your credit score, so making on time payments consistently, if you’re able, is a good way to protect your credit health. If you think you may struggle to pay, talk to the company you have the account with as soon as you can, before you miss the payment. We’ve seen a positive trend in companies reaching out to their customers to provide guidance during COVID-19. In fact, TransUnion’s Consumer Financial Hardship study shows that 69% of financially impacted Americans say that companies they have accounts with have contacted them about payment accommodations. But you don’t need to wait for your lender to contact you — almost half of all financially impacted Americans have already reached out to their lenders to discuss payment options. Be proactive if you’re having financial difficulties. COVID-19 is affecting people in many different ways, but everyone knows people are struggling. There are options and resources available to help provide support.

If you do plan to enroll in forbearance or deferment programs with your lenders, ask questions to be sure you understand all the terms. Good questions to ask might include whether the lender will still assess fees, how interest is calculated, and how the lender will report your account to the credit reporting agencies while it is in the hardship program. Then, try to develop a plan for when the accommodations end. There are guidelines for federally backed loans like mortgages and student loans thanks to stimulus relief packages, but relief options provided by private lenders may vary. Be sure to get all agreements in writing so you have the information you need to build a plan for restarting postponed payments later.

Guard against fraud

With new and sometimes confusing information out there about stimulus checks and small business loans, the environment is ripe with opportunity for fraudsters. The TransUnion Consumer Financial Hardship study found that a quarter of Americans know they’ve been targets of digital fraud schemes related to COVID-19. If someone gets access to important information like your Social Security number, they can wreak havoc on your finances and credit health. Be especially cautious right now with communications related to stimulus checks. Remember, no government organization will ask you to share sensitive information over phone, email or text message. Only use official government websites when submitting information online.

If you don’t plan to apply for new credit anytime soon, you may want to consider freezing your credit. This helps prevent fraudsters from opening new accounts in your name, as a freeze prevents lenders from accessing your credit report after they receive a new credit application. Credit freezes are free, don’t affect your credit score and can be easily lifted whenever you need to do so. You will need to place a credit freeze with each of the three credit reporting agencies separately if you want the most protection.

You also can add a free fraud alert to your credit report if you think you may have been a victim of fraud. A fraud alert does not block potential lenders entirely, but notifies them to take extra steps to verify your identity before extending new credit. If you add a fraud alert to your report at one credit reporting agency, the other two are notified automatically to add one to your report as well.

It’s completely natural to feel frustrated about a lack of progress with your finances, especially if you’ve made sacrifices to build your wealth and credit history. And it’s understandable that many people may feel like all they can do is sit back and wait for the economy to improve. But you don’t have to. You can take proactive action to protect what you’ve built. Establishing consistent, protective habits now can pay off later when we’re all better able to concentrate on growth.