Your Funds: Want credit-score ‘insurance’? Just pay down your bill | Column

Standard advice is to avoid going into debt during crisis times; amassing savings helps consumers hold the line on borrowing. But if the worker is carrying high rate credit card debt, they might be better off paying that down while employed, improving their credit score in the process and then using that better score to secure better rates that they can borrow against.

Say you’re paying off $5,000 on a credit card account at 16 percent. The idea is to minimize or remove that debt, improve your credit score and then arrange a personal loan or line of credit where the rate is much lower. Even if that is accessed and the debt winds up being run back up to $5,000 or beyond, the lower interest rate still represents improvement.

Likewise, tough times have lenders cleaning up their books, cutting card offers and closing accounts that they’re not profiting from. The first issues cut are the ones rarely used.

But credit scores depend heavily on “credit utilization” — the percentage of available credit that a consumer is accessing — and when an account is closed, the total available credit is reduced, and the score can come down as a result.

Thus, consumers should be using all of their cards now, not for spending more but to keep accounts active. If you have a card used primarily when you travel, for example, but you haven’t gone anywhere and don’t expect to during pandemic, bring out the card and make a random purchase.

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