Keeping your physical and mental health in check during the COVID-19 pandemic is crucial, but global information and insights provider TransUnion emphasizes that financial health must not be set aside. For most people, this generally entails having a steady flow of income, looking after any savings, and maintaining bill payments and other financial commitments. But with the severe economic impact of COVID-19 globally, this isn’t always possible and it is vital that consumers truly understand how certain aspects of finance work to find or even create opportunities amid these difficult times.
There is no standard measure of financial health as each person’s circumstances are unique, but there is one aspect to finance that is often misunderstood, and that is credit. Credit is an important part of the economy because it allows entities and consumers to engage in transactions now that may not be possible if they only rely on their current capacity.
Anyone who has a credit card, loan, bank overdraft, or other similar credit agreements has a credit report – a record of how they manage their credit obligations, collected and aggregated by credit agencies like TransUnion. When borrowers honor their obligations, there’s no reason to see credit in a bad light, especially as it helps the economy grow faster this way. But how do you manage credit in the middle of a pandemic?
“A healthy credit history can help determine a consumer’s ability to access financial products and their ability to get competitive deals. At TransUnion, we are working with financial institutions to help them better understand consumers so they can continue to provide them with the financial services they need. TransUnion’s data quality assurance team stringently reviews credit data contributions and ensures that consumers are being accurately represented so their access to financial services remain unhampered during the challenges presented by COVID-19,” said Pia Arellano, TransUnion Philippines president and CEO.
Regulatory and institutional safeguards notwithstanding, there are a number of habits that consumers can practice to maintain good credit health even amid a pandemic:
1. Pay bills on time
Make it a point to not miss any payment deadlines, even if you can only pay the minimum amount. Automate it if possible or set alarms if you must. The purpose of a credit report is to help lenders see whether or not you miss payments and predict a behavior pattern for the future.
There are grace periods accorded to consumers during the pandemic, so it’s best to be aware of the policies implemented by your bank or financial institution for your convenience. Depending on your case, you may need to contact them directly to arrive at a repayment plan that suits your needs at present. However, if you can pay as soon as the bills come in, do so and you’ll have less to worry about.
2. Set a budget and stick to it
The economic impact of COVID-19 is likely to extend over many years and having the discipline to stick to a budget and not over spend now will benefit you in the long run. In addition, do not apply for several new accounts at a time. Having a lot of simultaneous inquiries on your credit report worries lenders as it is a sign that you might be using credit and loans to supplement your income because you are spending beyond what you can actually afford.
3. Maintain low balances
Credit cards are considered “maxed-out” when you have spent 90% or more of the credit limit. When you maintain lower balances, lenders view you as someone who uses their credit responsibly. To achieve this, you should be able to pay your bills in full, on time, every time.
4. Build a strong relationship with lenders by being a responsible borrower
Lenders recognize that with higher credit limits comes increased responsibility. Credit limits tend to be reflective of both your wider financial standing as well as historic account conduct. A high credit limit reflected in your credit report can signal to lenders that you are a trustworthy candidate for new lines of credit. Should an unprecedented event such as this pandemic arise, you know that you’re in a position to access financial products at competitive interest rates if you need to.
5. Beware of phishing and other scams that proliferate even during crises
A recent TransUnion report found that fraudsters are decreasing their schemes against businesses but increasing COVID-19 focused scams against consumers online. With the rise in digital transactions in banking, make sure you do not fall victim to fraud activities like account takeover or unauthorized account opening schemes that can taint your credit report. As a general rule, steer clear of offers that sound too good to be true. Legitimate financial institutions can never provide miraculous results in the short-term. Other precautions include doing a regular review of your bank accounts for any suspicious activity, never providing sensitive information such as PINs and One-Time Passwords, and keeping your information secure against phishing attacks. It’s worth looking into password managers and updating your passwords on your bank accounts every so often. If you need to communicate with your bank, stick to its official channels.
6. Contribute to a savings fund
Building an emergency fund is generally considered good practice in your overall budgeting and serves to keep your credit health in check as well. Having enough funds on hand will help cover credit obligations, keeping you in good credit standing until you recover and things stabilize again.
Navigating the road to economic recovery
Build and keep the above-mentioned habits and you’ll maintain a good credit standing and overall financial health. Now, what should you do if you still cannot pay your bills at this time due to sudden loss of income or other extreme circumstances?
Consumers should coordinate with their bank or financial institution to explain their situation. Generally, consumers can request a payment holiday, lowering of monthly payments until they have fully recovered, or restructuring of a loan or credit facility for a smaller payment amount and longer tenure. Needless to say, it helps if you are in good credit standing to begin with.
As a seasoned and trusted global data steward, TransUnion recognizes its unique position to help consumers as they pursue economic recovery by helping financial institutions address current uncertainties using the power of information. Building on its database of 25 million account points that features a more holistic and insightful view into consumer behavior, TransUnion has started harnessing trended data that looks at richer information from a longer period of time (24 months payment history) to determine a consumer’s current and likely future financial situation. This, in turn, gives businesses quality information to continue supporting customers even in uncertain times such as the pandemic. When done right, everyone contributes to helping the economy bounce back stronger.
“We’ve been called to do bayanihan to recover as one, which essentially recognizes the need for us to work together to fully address current financial challenges. Our mission at TransUnion is to use the data that we have to help businesses and consumers make smarter finance decisions, especially during difficult times like this pandemic. We hope to continue creating a virtuous cycle of empowered businesses that empower consumers to gain access to financial services which can uplift their lives and financial health, as we believe this contributes a great deal to their physical and mental well-being too,” said Arellano.
For more information about maintaining your credit health, you may visit TransUnion’s FAQ page.
