Credit scores have surprisingly risen during this pandemic. Here's why they might be inflated — and what you can do about it. This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save...
COVID-19 has caused widespread illness, death, layoffs, joblessness and financial ruin. But weirdly, you might’ve been surprised to notice your credit score going up during this pandemic.
That may seem odd, but you’re not alone. The average credit score went up to 711 this summer, an all-time high since credit bureaus first started tracking this 15 years ago. That’s according to the Fair Isaac Corp., the company that created FICO scores.
Why is the average credit score so high now? Well, unfortunately, it’s sort of a mirage. Scores are being artificially inflated — propped up by a combination of government stimulus checks and deferred mortgage and student loan payments.
It’s kind of like a sugar high. And like a sugar high, it’s not going to last, and there’s going to be a crash at the end of it. Credit scores are expected to start dropping again, given the high unemployment rate and the number of Americans who are falling behind on their bills.
You don’t want yours to drop, believe me. Your credit score is important. The higher it is, the better deal you’ll get on a mortgage, a car loan, a credit card, or even a deposit on a car rental or an apartment.
As the U.S. economy struggles with the pandemic, it’s important to keep your credit score healthy.
How to Keep Your Credit Score Up
How do you do that? Start by keeping close tabs on it. We recommend using a free website like Credit Sesame.
Within two minutes, you’ll get access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. You’ll even be able to spot any errors holding you back (one in five credit reports have one).
How do the three major credit bureaus calculate your credit score? They use factors like how old your accounts are, your payment history and how much of your available credit you’re using.
Don’t get distracted by all that, though. The bottom line is, the best way to raise your credit score is to strategically pay down your debts and to correct false information in your credit history. A tool like Credit Sesame can help you do that.
While the average credit score has hit an all-time high, it’s only a matter of time until it drops. Too many Americans are financially struggling for it not to drop.
When major economic events happen, there’s typically a time lag before credit scores start to reflect the news. For example, during the Great Recession of 2007 to 2009, credit scores didn’t hit their low until 2009, well into the recession.
It’s up to you to keep your score up. Getting your free credit score takes less than two minutes.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.