How to keep your credit score high during the coronavirus crisis

Worried about your credit score during this uncertain economy?

You’re not alone. And it’s not just you who has concerns for their credit profile — businesses do too, particularly companies that issue credit cards. Here’s what you can do to keep your credit score high during the recession.

First, expect banks to begin dialing back credit limits. This is a routine practice during recessions as banks try to limit their losses. Unfortunately, these cuts can wallop even the best of borrowers.

During the 2008 recession, 20 percent of companies slashed credit lines for cardholders with high credit scores and 60 percent cut lines for subprime cardholders.

Among the first credit cards to be affected are dormant ones. If you have a credit card without a balance you haven’t used for awhile, it may be worth making a small purchase and paying it off.

“Dormant cards are prime candidates for cancellation, so if you haven’t made a purchase on a card in a while, you should buy something small and pay it off right away,” says Ted Rossman, industry analyst for Bankrate.

Next, you should watch for credit line reductions made by any of your credit card issuers.

If your card issuer reduces your credit line, your credit utilization ratio will be affected. For example, if your credit line is reduced from $10,000 to $5,000 and you have $1,000 of outstanding debt, your credit utilization will have doubled from 10 to 20 percent — even without your doing anything at all.

“Your credit utilization ratio, or the amount of credit you use compared to your overall limit, is one of the most influential factors in calculating credit scores under both FICO and VantageScore models,” BankRate notes. “Ideally, your utilization should remain under 30 percent, though the lower it is, the better for your score.

“If your credit limit is reduced but your spending remains the same, your utilization rate will increase,” the site adds. “In other words, if your credit limit is currently $20,000 and you spend $2,000 each month, your utilization rate is a healthy 10 percent. If your overall limit is reduced to $5,000 and you continue to spend $2,000, though, your rate will increase to 40 percent.”

Thus, it’s worth paying attention if your credit limits are reduced so that your credit score doesn’t take a hit.

In addition, you should avoid approaching the credit limit on any of your cards.

“You might see your credit limit cut or your card cancelled if you get close to your credit limit,” BankRate’s Rossman says. “That may be unavoidable if you’re in a financial bind, but if you can, try to pay down your balance and gain some separation between your credit limit and how much you owe.”

If you’re facing financial stress, reach out to your card issuer. Being proactive can often spare you grief down the road. Some banks and credit card issuers are allowing customers to defer payment during the current crisis.