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How to protect your credit score when money is tight

These simple steps can help you maintain a good credit score when money is tight.
May 06, 2020

By Katie Levene

Life can be unpredictable and sometimes finances can get tight. Even if you have an emergency fund, there may be times when making payments on your monthly bills or loans can be difficult. When these times come around, you may start worrying about your credit score. However, there are ways to protect your credit score when you’re on a slim budget.

How to prevent a ding to your credit score

There are several actions you can take to prevent a drop in your credit score. Before doing anything else, be sure to protect your credit score from fraud.  “If you do not have any plans to secure a loan, it’s always a good practice to freeze your credit at all three bureaus,” said Michelle Goeppner, director of credit product strategy and analytics at Alliant. “This prevents your credit from a breach or potential scam.”

Second, write down all of your recurring bills and prioritize your loans and essential bills. You need to continue making at least the minimum payments in order to prevent your credit score from taking a hit. This also may be a good time to refinance your loans, such as auto loans, HELOCs or your mortgage to reduce your monthly payments or get a better rate.

Finally, if making these payments are difficult, contact your financial institution. Communication is key when your budget is tight. Don’t avoid your bills and let the mount. Your lender will want to work with you to find a solution.

“Many individuals and businesses have been impacted by COVID-19. If you’ve been financially impacted by the coronavirus pandemic, call your landlord, lenders and providers to see what type of assistance they’re offering. They may be able to waive late fees, defer payments and/or offer special loans,” said Goeppner.

It can be hard to keep your credit score high when you’re on a shoestring budget. But if you follow these tips, you’ll come out on the other side.

If your credit is damaged, don’t panic

Despite your best efforts, your credit score may drop. If that’s the case, don’t panic. Your credit score can be repaired.  Your credit score is determined by your payment history, credit utilization, the age of your credit and the types of credit you have.

In order to save your damaged credit, you need to give each of these categories a boost. The most important categories are your payment history and credit utilization. Start making on-time payments consistently to improve your payment history. While doing this, pay more than the minimum due to help your credit utilization.

Credit utilization is a ratio to describe the amount of credit you’re using to the amount of credit available to you. For example, if you’ve got $6,000 worth of credit card debt and a total credit limit of $10,000, your utilization rate is 60%. As a rule of thumb, it’s ideal to keep this ratio under 30%, and having utilization of 10% or less is even better.

Other ways to repair your credit include monitoring your credit periodically and consolidating debt to lower interest loans (making it easier to pay off the loan).

If you need additional resources to help repair your credit, check out these articles:


Katie Pins Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.

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