Why did my credit score go up during the pandemic? - Simply Money


Q: Diana in Florence: I recently checked my credit score and found out it went up by about 40 points compared to a few months ago. I’m not complaining, but I thought it was odd. I haven’t done anything differently lately. I’m just wondering if you might know why this has happened?

A: Interestingly enough, this is not the first we’ve heard of this happening recently. And while we don’t know all the details of your credit history and credit habits, we have a good guess as to what might be going on: It’s likely your ‘debt utilization’ is lower than it was a few months ago. (Debt utilization is a fancy term for how much of your available credit you use every month. It’s important because it accounts for about 30% of your FICO credit score, the most common type of credit score.)

Let’s say you have three credit cards each with a $10,000 limit. This means, in total, you have $30,000 of credit at your disposal every month. The more of this amount you use, the higher your debt utilization, which has a negative impact on your credit score. The reverse is also true: The less you use of your available credit, the lower your debt utilization, and the more positive impact it has on your credit score. 

So, this brings us to the reason why your credit score has increased over the last few months: Have you found yourself spending less as you stay at home due to COVID-19? Because that’s likely the reason. If you’ve used your credit cards less, your debt utilization is going to be lower, which results in a higher score. 

Generally speaking, you should always try to keep your debt utilization under 30% every month (in the example above, that would mean using less than $9,000). However, most people with really high FICO scores keep theirs under six percent (which would be using less $1,800 a month in our example).

Here’s The Simply Money Point: As you mention, a higher credit score is always a good thing. Just keep this idea about debt utilization in your mind, though, once things get back to ‘normal.’ Because your score will benefit in the long run if you can continue to keep your debt utilization low.