As the coronavirus pandemic continues to alter nearly every person's daily life, it's important to prepare for what this means for your finances going forward.
It's OK if your credit score isn't top-of-mind at the moment given the financial uncertainty many are feeling, but it's crucial to at least think about the health of your finances as we head into the future.
A good credit score can open up borrowing opportunities when you need loans and help you earn a lower interest rate on the best credit cards. Taking action now to improve or maintain your score can save you money in the long run.
Below, Select explains why it's important to prepare your credit for post-pandemic life and how to do it.
Why preparing your credit is important
Planning ahead can help you prepare for surprises later down the road, such as a decrease in your credit score or creditors limiting your available credit.
"It isn't uncommon for creditors to re-evaluate credit and lending during times of uncertainty, and this is one of those times," says Leslie Tayne, a debt-relief attorney and founder of Tayne Law Group. Be aware of the certain card benefits and terms that issuers can change without advance notice, such as your credit limit, rewards rate and variable APR.
There are other limited-time changes that issuers are making in response to the coronavirus that can benefit cardholders. Some are revising their rewards programs to address the new ways people are spending their money.
For example, Capital One recently announced new cash-back rates for its Savor cards. Capital One Savor Cash Rewards Credit Card and Capital One SavorOne Cash Rewards Credit Card (see rates and fees) cardholders can automatically earn 4% (Savor) and 3% (SavorOne) cash back on eligible streaming services. Previously, streaming purchases earned only 1% cash back.
American Express has also added new benefits geared toward grocery, food delivery, streaming and wireless categories across 11 of its premium cards. Consumer co-branded credit cards like the Delta SkyMiles® Blue American Express Card and the Marriott Bonvoy Brilliant® American Express® Card now include bonus rewards at restaurants worldwide. Terms apply.
How to prepare your credit
There are a number of steps to take to prep your credit for the post-pandemic future that awaits us all.
- Monitor your credit: Credit monitoring products can help you keep track of your credit and receive alerts on potential fraud. You can check your credit score and credit report regularly by using the free resources available to you, like CreditWise from Capital One, Chase Credit Journey or Discover Credit Scorecard (regardless of whether or not you're a cardholder). Access a free credit report weekly from each of the three main credit bureaus by visiting AnnualCreditReport.com and make sure you know the balances on your credit report and recognize all of the creditors listed.
- Read your credit card statement carefully: Even if you haven't used your card recently, make sure to regularly check the statements for any unauthorized charges. Contact your issuer right away if you spot any purchase you don't recognize. "During times of crisis, scammers and identity thieves are even more prominent because they prey on vulnerable consumers," Tayne says.
- Protect your credit from scammers: If you don't plan on applying for new lines of credit in the near future, consider freezing your credit so no one can open up new accounts in your name. Credit freezes don't take much time, about 30 to 45 minutes, and you'll want to set it up with all three credit bureaus (Experian, Equifax and TransUnion). They're easy to unfreeze when you need to; just call the credit bureaus or visit their websites.
- Think ahead about your budget post-pandemic: This is especially important if you've only been making minimum payments during this time. Take a look at your spending and earning and begin to make a plan to repay your debt. "The pandemic may have enlightened you to areas where you can continue to spend less going forward," Tayne says.
- Be aware of when issuers are rolling back their hardship programs: Many card issuers have been offering financial hardship assistance during this time, but it's important to know when they end. This will prevent you from missing payments accidentally, which could result in late fees and a ding to your credit.
Bottom line
While preparing your credit for a post-pandemic life may seem like a big to-do, start first with the simple step of reviewing your credit report.
Monitoring your credit is a good habit to have, and half the battle of prepping your credit for the future is knowing what has affected it during these past few months.
"Remember that this situation won't last forever and that when you have a steady income once again, you can work to get back on track," Tayne says.
Information about the Capital One Savor Cash Rewards Credit Card has been collected independently by Select and has not been reviewed or provided by the issuer of the card prior to publication.
