LOUISVILLE, Ky. (WAVE) - The COVID-19 pandemic has wreaked havoc not only on our holiday plans but also on our finances.
The economic fallout from the coronavirus continues to devastate families and businesses across WAVE Country. According to a study done by WalletHub, Indiana and Kentucky ranked among the 20 states with the most financial stress because of the coronavirus pandemic.
This may not be what you want to hear during the holiday shopping season, but Indiana ranked fifth-worst in the credit-score category, and Kentucky ranked third-worst.
Since the start of the pandemic, the rate of filings for personal bankruptcy in Kentucky and Indiana ranks among the top five states nationwide.
“We’ve seen people lose jobs,” WalletHub spokeswoman Jill Gonzalez said. “We’ve seen credit scores take a dip as well.”
A person’s credit score is one of the biggest factors that determines the course of his or her financial life, from getting credit cards to qualifying for home loans to even renting apartments.
“Kentucky ranks 45th out of all the states, so No. 1 would be the highest credit score,” Gonzalez said. “Fiftieth would be the lowest. Kentucky is 45th. Indiana is 36th.”
Generally, credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
“The average Kentuckian’s credit score is 671,” Gonzalez said. “The average Indianan is 677.”
Your credit score may not be at the top of your list of things to think about this holiday season as you prepare to celebrate with family and friends, but what you do now can affect what you qualify to do later.
”Credit scores are essentially how lenders, how employers, how landlords gauge how you’ve done as a consumer thus far,” Gonzalez said.
During the pandemic, many families have had trouble financing their daily needs. The holiday season brings additional financial stress to the picture.
“I think most of us are used to getting everyone’s wish list, holiday wish, granting all of those wishes,” Gonzalez said. “This year I think it’s important to reign in that spending.”
If you don’t have the cash, don’t spend the cash and don’t charge it either, Gonzalez said. Your credit score is determined by evaluating the data in your credit file to determine how likely it is you will pay back your credit obligations. Factors in determining that score include:
- Payment history: Have you paid your debts on time?
- Amounts owed: How much debt do you have?
- Length of credit history: How long have you had credit accounts open?
- Credit Activity: How many times have you applied for credit in the last 12 months, and how many inquiries have you had looking into your credit?
- Type of credit: This looks at your credit card accounts, mortgages, auto loans, installment loans and any debt you may have incurred.
“I think one of the biggest mistakes people make is, ‘My credit score has already taken a hit; there’s nothing I can do about it; I might as well sit back and watch it fall,’” Gonzalez said.
Maxing out your credit cards to cover a little holiday cheer can really hurt your credit and your future opportunities
“You want to stop the bleeding,” Gonzalez said. “You really want to do whatever you can to make sure that decrease in your credit score stops now so that you can slowly start to rebuild.”
To improve your credit score;
- Pay your bills on time.
- Pay off as much debt as you can.
- Keep your credit card balance well below the limit.
- Apply for credit sparingly.
- If you are facing financial hardship, especially due to COVID-19, contact your creditors immediately.
“One silver lining is that this is considered a disaster,” Gonzalez said. “The same way Hurricane Katrina or Hurricane Sandy affected people’s livelihoods.”
There are many programs that have been developed since the start of the pandemic to ease financial stress for those affected by the coronavirus. From mortgage lenders to school loans, creditors are finding ways to help families get by during this difficult time.
“They’re really doing a lot to help consumers right now, but you have to ask for that help,” Gonzalez said.
Some things you can do to keep Christmas from breaking the bank this year, including scaling down that gift list, giving the gift of time instead of pricey merchandise and trying to keep track of what you are spending.
Experts recommend checking your credit score at least once a year. There are several free or paid services that will allow you to check your score. You can also get a free credit report yearly from Equifax, Experian, and TransUnion at the official site www.annualcreditreport.com. This will not include your credit score, but will allow you to look for errors or fraudulent accounts.