How to Improve Your Credit Score During a Recession

When times are good and you've got a steady income, staying on top of your debt and other bills can be a simple task. During a recession, however, you could face a different reality. If a layoff or pay cut reduces your income, you might have trouble paying your bills, which can hurt your credit scores. But it doesn't have to be that way. You can improve your credit score during a recession by practicing good credit habits, reducing expenses and making sure you have a savings fund to draw on in an emergency.

How Can a Recession Affect Credit?

There are many ways a recession can directly or indirectly affect your credit. Losing your job or taking a pay cut might make it difficult to keep up with your bills. If you miss debt payments or pay more than 30 days late, your credit score will suffer.

If your income is reduced, you might start relying on credit cards to pay your basic expenses. As your credit card debt inches up, your credit utilization ratio will rise too. This ratio measures the amount of revolving credit you're currently using compared with the amount of revolving credit available to you. If you begin using more than 30% of your available credit, your credit scores could suffer.

Applying for too many credit cards, loans or other types of credit during a recession could also negatively affect your credit score. For each application you fill out, the lender will perform a hard inquiry on your credit report. Too many hard inquiries in a short time can suggest to lenders that you're having trouble making ends meet.

Recessions can also make it harder to get new credit. During an economic downturn, lenders often set stricter standards for extending credit, which can make it more difficult to get approved for loans or credit cards. Maintaining or even improving your credit score during an economic downturn can help ensure you can access credit when you really need it.

On the positive side, some lenders may be more willing to work with borrowers who are struggling to make payments during hard times. They may offer options such as reducing or deferring payments, which can help you stay current on payments and maintain your credit score. If you think you may have trouble making your payments, contact the creditor as soon as possible to see if they can help—and try not to wait until a due date has passed. Being proactive can help keep your account in good standing—and keep your credit score from falling.

Check Your Credit Score and Report

One of the first things you should do when a recession hits is check your credit score and get a copy of your credit report so you know where you stand and how much work you'll need to do to improve your credit score.

You should check your credit reports from each of the three major credit bureaus—Experian, TransUnion and Equifax—and review them for any inaccuracies. Creditors sometimes make errors when reporting to the credit bureaus. If a creditor mistakenly tells the credit bureau that you made late payments or that your account went to collections, it could hurt your credit score unless you correct the problem. If you see an error, you should file a dispute with that credit bureau to get the information corrected.

Correcting inaccurate negative information can potentially improve your credit score. Check your credit report on a regular basis to stay on top of any inaccuracies so you can report them to the credit bureau before they damage your credit score. You can also set up free credit monitoring to get alerted of any changes to your credit report and credit score, as well as get a free monthly credit report and score from Experian.

Catch Up on Past-Due Payments

Keeping up with your payments is critical to maintaining good credit during a recession. Your payment history is the single most important factor in your credit score, accounting for 35% of your FICO^® Score^☉ (the most commonly used score). Even one missed payment can have a negative impact on your credit score.

If you're behind on any of your payments, make it a point to catch up as quickly as possible. Once your accounts are current, be sure to stay on top of your payments. If you have trouble remembering when payments are due or you have a lot of credit accounts to keep track of, consider setting up automatic payments for the minimum amount due. This will ensure you never miss a due date.

Consider Adjusting Your Spending Habits and Building a Budget

If you don't have a budget, now is the time to create one. If you already have a budget, now is a good time to review it and make some adjustments to your spending habits. Tightening your belt and reducing unnecessary spending can help you remain financially stable despite a recession.

To create a budget, determine your income; your essential expenses, such as rent or mortgage, food and transportation; and how much you spend on nonessential items, such as eating out or buying new clothes. Tracking your expenses for a few months can help you get a clearer picture of your spending habits and where you can cut back.

During a recession, you should aim to reduce both essential and nonessential spending as much as possible. Keep your spending within your income limits so you don't have to rely on credit cards. If you must use credit cards, charge only as much as you can pay off in full each month. Building up a big credit card balance could make it hard to keep up with your payments, especially if you lose your job or your income is reduced, and will hurt your credit score.

Make Sure You Have an Emergency Fund

A recession can make your job and income uncertain. You may get laid off, have your hours reduced or have to take a pay cut. If you're self-employed, you may lose customers or have clients go out of business. Building an emergency fund can help ensure you can cover any monthly payments if the recession does affect your income.

Ideally, you should begin saving toward your emergency fund before any signs of a recession appear and continue saving throughout the downturn. But even if you don't have an emergency fund, it's never too late to start one.

As a general rule, experts suggest building an emergency fund that can cover three to six months of essential expenses. If your industry is particularly at risk or if you're self-employed, you may want to save even more. If that's not possible, don't give up—just start setting aside what you can afford each month.

Putting your emergency fund in a dedicated account—ideally, one that earns interest—will help reduce the temptation to pull from it on a whim. (Just make sure you can quickly access the money if needed without incurring a penalty.) To make saving money easy, set up an automated transfer from your checking account to your savings account every paycheck. Also put any "extra" money that comes your way, such as bonuses, tax refunds or cash gifts, into your emergency fund.

Are you having trouble squeezing extra money out of your current income? Perhaps you're already feeling a financial crunch from the recession. If your budget has no room to spare, see if you can get a side job or sell unwanted items, such as clothing, electronics or furniture, to generate some cash for your emergency fund.

Maintain a Good Credit Score Despite a Downturn

Yes, a recession can hurt your credit score—but it's also possible to maintain or even improve your credit score during an economic downturn by taking a few simple steps. Developing a budget, reducing your expenses and building up an emergency savings fund will help ensure you have the funds you need to pay your bills so you can maintain a good credit score, no matter what challenges the economy brings.

If you need to improve your credit score, one quick way to do so is to sign up for Experian Boost^®^ø, a free service that gives you credit for on-time utility and cellphone bill payments. (Normally, this information isn't part of your credit report.) Even in a recession, you'll still need to pay utility and cellphone bills, so why not use them to boost your credit score?

How Good Is Your Credit Score?

300 credit score 301 credit score 302 credit score 303 credit score 304 credit score 305 credit score 306 credit score 307 credit score 308 credit score 309 credit score 310 credit score 311 credit score 312 credit score 313 credit score 314 credit score 315 credit score 316 credit score 317 credit score 318 credit score 319 credit score 320 credit score 321 credit score 322 credit score 323 credit score 324 credit score 325 credit score 326 credit score 327 credit score 328 credit score 329 credit score 330 credit score 331 credit score 332 credit score 333 credit score 334 credit score 335 credit score 336 credit score 337 credit score 338 credit score 339 credit score 340 credit score 341 credit score 342 credit score 343 credit score 344 credit score 345 credit score 346 credit score 347 credit score 348 credit score 349 credit score 350 credit score 351 credit score 352 credit score 353 credit score 354 credit score 355 credit score 356 credit score 357 credit score 358 credit score 359 credit score 360 credit score 361 credit score 362 credit score 363 credit score 364 credit score 365 credit score 366 credit score 367 credit score 368 credit score 369 credit score 370 credit score 371 credit score 372 credit score 373 credit score 374 credit score 375 credit score 376 credit score 377 credit score 378 credit score 379 credit score 380 credit score 381 credit score 382 credit score 383 credit score 384 credit score 385 credit score 386 credit score 387 credit score 388 credit score 389 credit score 390 credit score 391 credit score 392 credit score 393 credit score 394 credit score 395 credit score 396 credit score 397 credit score 398 credit score 399 credit score 400 credit score 401 credit score 402 credit score 403 credit score 404 credit score 405 credit score 406 credit score 407 credit score 408 credit score 409 credit score 410 credit score 411 credit score 412 credit score 413 credit score 414 credit score 415 credit score 416 credit score 417 credit score 418 credit score 419 credit score 420 credit score 421 credit score 422 credit score 423 credit score 424 credit score 425 credit score 426 credit score 427 credit score 428 credit score 429 credit score 430 credit score 431 credit score 432 credit score 433 credit score 434 credit score 435 credit score 436 credit score 437 credit score 438 credit score 439 credit score 440 credit score 441 credit score 442 credit score 443 credit score 444 credit score 445 credit score 446 credit score 447 credit score 448 credit score 449 credit score 450 credit score 451 credit score 452 credit score 453 credit score 454 credit score 455 credit score 456 credit score 457 credit score 458 credit score 459 credit score 460 credit score 461 credit score 462 credit score 463 credit score 464 credit score 465 credit score 466 credit score 467 credit score 468 credit score 469 credit score 470 credit score 471 credit score 472 credit score 473 credit score 474 credit score 475 credit score 476 credit score 477 credit score 478 credit score 479 credit score 480 credit score 481 credit score 482 credit score 483 credit score 484 credit score 485 credit score 486 credit score 487 credit score 488 credit score 489 credit score 490 credit score 491 credit score 492 credit score 493 credit score 494 credit score 495 credit score 496 credit score 497 credit score 498 credit score 499 credit score 500 credit score 501 credit score 502 credit score 503 credit score 504 credit score 505 credit score 506 credit score 507 credit score 508 credit score 509 credit score 510 credit score 511 credit score 512 credit score 513 credit score 514 credit score 515 credit score 516 credit score 517 credit score 518 credit score 519 credit score 520 credit score 521 credit score 522 credit score 523 credit score 524 credit score 525 credit score 526 credit score 527 credit score 528 credit score 529 credit score 530 credit score 531 credit score 532 credit score 533 credit score 534 credit score 535 credit score 536 credit score 537 credit score 538 credit score 539 credit score 540 credit score 541 credit score 542 credit score 543 credit score 544 credit score 545 credit score 546 credit score 547 credit score 548 credit score 549 credit score 550 credit score 551 credit score 552 credit score 553 credit score 554 credit score 555 credit score 556 credit score 557 credit score 558 credit score 559 credit score 560 credit score 561 credit score 562 credit score 563 credit score 564 credit score 565 credit score 566 credit score 567 credit score 568 credit score 569 credit score 570 credit score 571 credit score 572 credit score 573 credit score 574 credit score 575 credit score 576 credit score 577 credit score 578 credit score 579 credit score

580 credit score 581 credit score 582 credit score 583 credit score 584 credit score 585 credit score 586 credit score 587 credit score 588 credit score 589 credit score 590 credit score 591 credit score 592 credit score 593 credit score 594 credit score 595 credit score 596 credit score 597 credit score 598 credit score 599 credit score 600 credit score 601 credit score 602 credit score 603 credit score 604 credit score 605 credit score 606 credit score 607 credit score 608 credit score 609 credit score 610 credit score 611 credit score 612 credit score 613 credit score 614 credit score 615 credit score 616 credit score 617 credit score 618 credit score 619 credit score 620 credit score 621 credit score 622 credit score 623 credit score 624 credit score 625 credit score 626 credit score 627 credit score 628 credit score 629 credit score 630 credit score 631 credit score 632 credit score 633 credit score 634 credit score 635 credit score 636 credit score 637 credit score 638 credit score 639 credit score 640 credit score 641 credit score 642 credit score 643 credit score 644 credit score 645 credit score 646 credit score 647 credit score 648 credit score 649 credit score 650 credit score 651 credit score 652 credit score 653 credit score 654 credit score 655 credit score 656 credit score 657 credit score 658 credit score 659 credit score 660 credit score 661 credit score 662 credit score 663 credit score 664 credit score 665 credit score 666 credit score 667 credit score 668 credit score 669 credit score

670 credit score 671 credit score 672 credit score 673 credit score 674 credit score 675 credit score 676 credit score 677 credit score 678 credit score 679 credit score 680 credit score 681 credit score 682 credit score 683 credit score 684 credit score 685 credit score 686 credit score 687 credit score 688 credit score 689 credit score 690 credit score 691 credit score 692 credit score 693 credit score 694 credit score 695 credit score 696 credit score 697 credit score 698 credit score 699 credit score 700 credit score 701 credit score 702 credit score 703 credit score 704 credit score 705 credit score 706 credit score 707 credit score 708 credit score 709 credit score 710 credit score 711 credit score 712 credit score 713 credit score 714 credit score 715 credit score 716 credit score 717 credit score 718 credit score 719 credit score 720 credit score 721 credit score 722 credit score 723 credit score 724 credit score 725 credit score 726 credit score 727 credit score 728 credit score 729 credit score 730 credit score 731 credit score 732 credit score 733 credit score 734 credit score 735 credit score 736 credit score 737 credit score 738 credit score 739 credit score

740 credit score 741 credit score 742 credit score 743 credit score 744 credit score 745 credit score 746 credit score 747 credit score 748 credit score 749 credit score 750 credit score 751 credit score 752 credit score 753 credit score 754 credit score 755 credit score 756 credit score 757 credit score 758 credit score 759 credit score 760 credit score 761 credit score 762 credit score 763 credit score 764 credit score 765 credit score 766 credit score 767 credit score 768 credit score 769 credit score 770 credit score 771 credit score 772 credit score 773 credit score 774 credit score 775 credit score 776 credit score 777 credit score 778 credit score 779 credit score 780 credit score 781 credit score 782 credit score 783 credit score 784 credit score 785 credit score 786 credit score 787 credit score 788 credit score 789 credit score 790 credit score 791 credit score 792 credit score 793 credit score 794 credit score 795 credit score 796 credit score 797 credit score 798 credit score 799 credit score

Resources

Credit Score

Credit Report

Fraud & Identity Theft

Improve Credit

Personal Finance

Calculators

How to Improve Your Credit Score During a Recession

In this article:

How Can a Recession Affect Credit?

Check Your Credit Score and Report

Catch Up on Past-Due Payments

Consider Adjusting Your Spending Habits and Building a Budget

Make Sure You Have an Emergency Fund

Maintain a Good Credit Score Despite a Downturn

Instantly raise your FICO^® Score for free

How Good Is Your Credit Score?

Resources

Latest Research

Latest Reviews

Instantly raise your FICO^® Score^☉ for free^ø

Credit support

Credit advice

Most popular

Credit reports

Credit scores

Improving credit

Establishing credit

Identity Theft support

Identity Theft Advice

Most popular

Identity theft and fraud

Cybersecurity

Privacy

Money advice

Most popular

Digital checking account

Save money on bills

Credit Card advice

Most popular

Balance transfer

Cash back

For bad credit

For fair credit

For students

APR

Rewards

New to credit

Loan advice

Most popular

Debt consolidation

Personal

Student

Auto advice

Most popular

In this article:

How Can a Recession Affect Credit?

Check Your Credit Score and Report

Catch Up on Past-Due Payments

Consider Adjusting Your Spending Habits and Building a Budget

Make Sure You Have an Emergency Fund

Maintain a Good Credit Score Despite a Downturn

Instantly raise your FICO® Score for free

How Good Is Your Credit Score?

Resources

Latest Research

Latest Reviews

Instantly raise your FICO^® Score for free