Here’s how COVID-19 may impact your credit score

WASHINGTON » The $1,200 stimulus relief aid you received has long been spent. The $600-a-week unemployment bonus is gone.

Your old job isn’t coming back. Nearly 25% of workers who were furloughed in March have seen their wages dwindle by 10% or more compared to pre-covid times, according to Gusto, a payroll and benefits firm.

With no new stimulus package expected soon, tens of millions of people are struggling to cope with deepening financial losses as a result of the pandemic. And many are worried about how their credit history will be impacted. They know their credit matters now and will matter later, once the pandemic has passed.

Here are some answers to frequently asked questions about the coronavirus and your credit score.

WHAT SHOULD I DO ABOUT MY CREDIT SCORE IF I CAN’T PAY MY BILLS DUE TO A JOB LOSS?

“Credit scores are fluid depending on consumers’ financial activity,” said Rod Griffin, senior director of consumer education and advocacy for Experian.

“When consumers are able to make their payments in full and on time, they will see their credit scores bounce back over time. They should not be as worried in the short term about the effects on their credit scores.”

But the reality is that the top two factors that can lower your credit score are late payments and using a lot of your available credit line — actions you may feel are necessary right now.

Many lenders are offering relief that will temporarily pause or reduce monthly payments. But you need to ask for it, or keep asking.

“If you’re struggling to pay bills, contact companies you have accounts with as soon as you can to ask if they offer any kind of financial accommodations,” says Amy Thomann, head of consumer credit education at TransUnion.

Under the Coronavirus Aid, Relief, and Economic Security (Cares) Act, if you have a federally backed mortgage, you can ask for a forbearance of up to 180 days. If additional relief is needed, you are entitled to another 180-day extension.

WILL A FORBEARANCE NEGATIVELY IMPACT MY CREDIT SCORE?

The mere fact of an account being in forbearance is not a negative against your credit history, Griffin said.

Because no payments are due during the forbearance, no new late payments should be reported to the credit bureaus.

The Cares Act requires that creditors report you as current if you were not behind on your mortgage payments when you sought a forbearance. If you were behind — 30 days late, for example — the lender must report exactly that to the credit bureaus. Essentially, during the duration of the forbearance, your payment status is frozen at whatever level you were at when you asked to pause your payments.

The Cares Act also suspended negative credit reporting for eligible federal student loans. The Department of Education is supposed to report suspended payments to the major credit bureaus as if they were made on time.

Be sure to double-check that your paused payments are being properly reported. To help with this, the three major credit bureaus — Equifax, Experian and TransUnion — have made it easier to view your credit history by offering free weekly online credit reports through April 2021. Go to annualcreditreport.com to request the reports.

HOW WILL MISSED PAYMENTS IMPACT MY SCORE IF I’VE HAD A GOOD HISTORY OF PAYING MY BILLS ON TIME?

How much your score will drop depends on a lot of factors. Generally, the impact will be more noticeable on a credit report with no history of missed payments vs. a credit report that already shows a history of missed payments, said Tom Quinn, vice president of scores at FICO.

In an example provided by FICO, a homeowner who has never missed a payment has a FICO score of 793. But a 30-day late payment could drop her score by as much as 83 points. But the drop to the low 700s on a scale that runs from a low of 300 to a high of 850 is still a good score.

HOW QUICKLY CAN I REBUILD MY CREDIT SCORE IF IT DROPS BECAUSE OF COVID-19?

The most important factors in calculating credit scores are on-time payments and your credit utilization rate.

Missed payments have less impact on your score as time passes. “If having amounts owed is a key driver on why the score is lower, the individual has control over how quickly they can reduce that debt so that the score increases,” Quinn said.

Once you’re financially able, consistently pay all bills on time, reduce outstanding debts owed and don’t apply for new credit, Quinn said.

HOW MUCH OF MY CREDIT CAN I USE BEFORE IT HAS A NEGATIVE EFFECT ON MY CREDIT SCORE?

There isn’t a specific threshold at which your credit utilization begins to negatively impact your score. However, the goal should be to keep your credit utilization rate under 30% for each credit card, and in total, the lower the better, Griffin says.

“If a person increases their balances as they go through this time of crisis, they could see a rapid improvement as their financial situation improves and they begin to pay down the balances,” he said.

HOW CAN A DROP IN MY CREDIT SCORE IMPACT MY SEARCH FOR A JOB?

To view your credit history, employers must get your permission. But even then they get a limited version, although it still will show a picture of how you handle your debts. But the report does not include your credit score.

If the employment credit report plays any part in a decision that negatively affects you, federal law requires the company to give you a copy of the report along with a written description of your rights.

Readers can write to Michelle Singletary c/o The Washington Post, 1301 K St., N.W., Washington, D.C. 20071. Her email address is michelle.singletary@ washpost.com. Follow her on Twitter (@ SingletaryM) or Facebook (www.facebook.com/ MichelleSingletary). Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.

With no new stimulus package expected soon, tens of millions of people are struggling to cope with deepening financial losses as a result of the pandemic. And many are worried about how their credit history will be impacted.