Has the Pandemic Hurt Your Credit Score?

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If your credit score has declined over the last couple of years, it might be tempting to blame the COVID-19 pandemic. But based on the available data, the pandemic might not have played that big a role.

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In fact, average credit scores in the United States went up rather than down during much of the pandemic. From the third quarter of 2020 through the third quarter of 2021, the average FICO score in the U.S. rose by four points to 714, according to data published in the spring by Experian.

A separate study from the Urban Institute, also published this year, found that the median credit score for all adults with a credit record was 709 in August 2021, the most recent data available. That compares to 693 in February 2020, before COVID-19 began its rapid spread around the country. About 20% of adults with a credit record had a subprime credit score in August 2021, down from 25% in February 2020.

Meanwhile, delinquencies for credit card accounts actually fell during the first year of the pandemic, according to research published in early 2021 by the National Consumer Law Center.

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The main reason credit scores improved even in the face of shuttered businesses and rising unemployment is because credit card utilization rates decreased during the pandemic, according to a report from the Federal Reserve Bank of Boston. Credit utilization is the percentage of the amount of credit you owe vs. your total credit limit across all cards and loans.

“This effect is most visible for households with the lowest credit scores,” the report said. “These households saw the highest increases in credit scores and the largest decreases in credit card utilization.”

One reason credit utilization ratios might have fallen during the pandemic is that many Americans used federal stimulus checks to pay down debt. This could help explain why households with lower credit scores saw higher increases than households with high credit ratings.

Another factor was this: During long stretches of the pandemic, there just weren’t that many things to spend money on — particularly in terms of discretionary purchases. Many stores and restaurants were forced to close during COVID-19 lockdowns, and travel came to a near standstill. With no place else to put their money, many Americans put it toward savings or debt reduction.

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All of which means credit scores could weaken now that pandemic restrictions have been lifted and the economy has opened back up again. The hospitality industry — hotels, airlines, restaurants and the like — has seen a major uptick in business this year compared with pandemic numbers. This means many consumers are running up their credit-card bills.

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The wild card is how high inflation and a looming recession will impact spending moving forward. If consumer confidence sinks, there could be a leveling off in spending, experts say, which would likely have a positive impact on credit scores.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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