I’m Relying on My Credit Card More. Will That Hurt My Credit Score?

Our Consumer Pulse revealed more than one-third of the country continues to be impacted financially by the pandemic. As financial hardship spread, people initially turned to savings, but some Americans are relying more heavily on credit to pay bills. In our most recent study, one in five people said they were using more of their available credit. 17% of people with a credit card say they won’t be able to pay it. If you’re depending on credit cards to get by, it’s important to know how increased use can affect your score.

Credit utilization

If you use your credit cards a lot, you should be mindful of your credit utilization rate. It’s one of the biggest factors in your credit scores and can be an easily missed reason your score changes. Basically, credit utilization measures how much credit you’re using compared to your available credit limit. Say you have a total credit limit of $10,000 from all your credit cards. If your current combined balances on all those cards is $2,000, then your credit utilization rate is 20% ($2,000 divided by $10,000).

The lower your utilization rate, the better it is for your credit scores. Ideally, your utilization will be as low as possible. This would mean you make purchases and pay them back by the statement due date. If you need to use credit cards to pay bills or meet other needs, your utilization rate could climb along with your balances. This could lower your credit scores. However, paying down those balances can help your credit scores bounce back too.

Missed payments

Your payment history is another major factor in your credit scores. Using credit cards more and creating a higher balance can increase your monthly minimum payment. If you miss or can’t make the payment, it can damage your credit score. Late payments can remain on your credit report for up to seven years, so consistently making on-time payments is crucial to a healthy credit history. You also may be charged late fees for missing payments, in turn paying more in fees and interest over time.

Credit card relief programs

Because on-time payments are so important to your credit, you should contact your lender immediately if you’re worried about being able to pay your upcoming credit card bill. Our study found that 13% of credit card holders have enrolled in some sort of financial accommodation plan. Lenders know people are struggling and may be willing to work with you.

Some credit card issuers may allow you to defer or pause payments. They may also offer to lower your interest rate or adjust your payment due date. If you have credit cards with high annual fees, it may be worth asking if those fees can be waived or if you can downgrade your card to a lower- or no-fee card. Of course, the options available depend on your lender. The Consumer Financial Protection Bureau has created a helpful resource guide about credit card relief options during COVID-19.

Everyone has bills to pay, and if options are limited, you may need to use a credit card to tide you over. Do the best you can to keep your balances low and make your payments on time. And, continue to use TransUnion's resources to help protect your credit health until you’re able to get back to work or replenish your savings.