We’re all stuck in this mayhem that COVID-19 has created. Most people are quarantined, lots have lost their jobs, and many others are likely to face the same in the near future.
US citizens are not the biggest fans of loans, yet it seems there’s no other way to buy a house or a car unless you get yourself into huge debt. Every new loan worsens your credit score. If you buy a home worth $500,000 and a car worth $50,000, chances are banks won’t approve you another loan.
According to recent credit score statistics, merely 19% of Americans have no credit score. On the other hand, more than 80% of the population has a credit score for banks and other institutions to look at.
Having in mind that COVID-19 is most likely going to push the entire world into another recession, we can’t help but wonder how that is going to affect the “little guy.”
Restrain From Getting Another Loan
There’s a global pandemic on the loose, yet you may feel like nothing’s changed. Your paycheck is regular, the salary is intact, and the work is flowing. The regular income will trick a lot of people into buying a new vehicle. However, it’s best if you paid more attention to the issue.
Namely, we can’t say for sure whether the situation will improve or worsen in the coming weeks (and months). Experts predict that the world is going to face a recession as we’ve never seen before. It can last a long time, so it’s wiser not to get into more debts right now if not absolutely necessary.
Another issue related to credit scores (and the pandemic) is regular monthly payments. Your credit’s payment history accounts for around 35% of the score, making it the deciding factor in getting a new loan or better rates.
If the crisis persists for longer, as experts predict, no job position is secure. And losing your job means not being able to pay off your debts. Being late also instantly drops your credit score.
Focus on Savings
If you’re having problems with money due to the ongoing COVID-19 pandemic, it’s best to research what different banks and institutions offer for financial relief.
If money isn’t posing a problem at this point, a smart move would be to start saving as much as possible. According to personal finance statistics, the average American spends $60,060 a year. Still, it’s smarter to save now. Moreover, try not to spend on things that are not absolutely necessary. You never know what’s going to happen next and whether you’ll have enough money to cover your debts.
Once you get a bad credit score, it’s a lot harder to get it back up. Wait a few months until the situation clears and then go for new investments.
Until then, it’s best to spend only on bare necessities.
Choosing Between Necessities and Credit Payment
When a person has no income, they can’t repay their debts; simple as. If anyone finds themselves in said situation, the most important thing is to provide for their families.
Every credit score can be rebuilt after a while. However, it may take some time (lots of it). Some of the issues will make your credit score drop quite substantially. Hence, it may take up to 10 years before the score goes back to normal.
That’s why it’s smarter to do everything in your power to avoid landing in such a situation in the first place; stopping the problem dead in its tracks is much better than finding solutions for it later on.
What Does the Future Hold?
Some scientists warn about the imminent possibility of a second or third wave. There’s still no official vaccine, and no one knows when or if it will ever be produced.
The lockdown may last for years, and many an industry will collapse if it does. Over 10 million Americans lost their jobs already, and no one can say for certain how many more will lose their jobs in the near future.
Use the above-mentioned points to maintain a good credit score during these hard times. Make sure you focus on your savings and use all the benefits that you have at your disposal. This is the best way to cope with the crisis at hand and keep your credit score at an all-time high. Good luck.