Increased financial stress for households

The U.S. job market is showing signs of strain. In May 2025, the Bureau of Labor Statistics (BLS) reported that the economy added 139,000 jobs, a drop from the previous month and well below the monthly average gain for the past year. Earlier estimates for March and April were also revised downward, suggesting a broader slowdown in employment growth.

Not everyone will feel the effects of a slowing job market, but it can lead to longer job searches, more competition, and slower wage growth in some industries. These changes may create challenges for some households trying to maintain financial stability.

Does reduced income affect your credit score?

Nothing happens to your credit score as a direct result of reduced income. However, income disruption, whether temporary or long-term, can lead to financial strain. For some, that may make it more difficult to stay current on payments, particularly on credit cards, loans, or other recurring obligations. Late payments are commonly reported to credit bureaus and may negatively impact credit scores.

Others may continue making payments but rely more heavily on credit to cover expenses. That can increase their credit utilization ratio, which may also influence credit scores. Even individuals who stay current on bills could see changes to their score if balances grow significantly or if lenders reduce available credit in response to economic conditions.

Remember that missed payments are one of the most common causes of credit score damage. Managing your budget carefully and making at least the minimum payments on time can help you avoid negative marks like delinquencies or collections.

Protect your credit in an uncertain job market

No one can fully predict how the economy will evolve or how it may affect your credit, but it is always wise to adopt good personal finance and credit management practices.

• Consider building or rebuilding an emergency fund. Having savings to cover a few months of essential expenses can reduce reliance on credit during income disruptions.
• Try to make at least the minimum payments on all accounts. Maintaining a positive payment history is one of the most important factors in credit health.
• Communicate with creditors early if financial strain is expected. Some lenders offer hardship options that could temporarily pause payments or reduce fees.
• Monitor your credit regularly. This may alert you to changes in your credit report or score, giving you time to respond.

Stay alert to economic changes

Economic shifts can affect credit indirectly. If interest rates change or lending standards tighten, consumers may find it harder to access new credit or secure favorable terms. Tracking trends in your own industry or region may also help you plan ahead, especially if layoffs become more common.

Resources like the Federal Reserve Bank of New York’s Survey of Consumer Expectations offer helpful insight into how people view the job market and inflation outlook.

Some households may be eligible for support through state or federal programs if the employment outlook worsens. Being aware of those options in advance could help reduce stress and avoid late payments in the event of sudden changes. If you are experiencing financial strain, these federal resources may help:

• Hardship help for mortgages and rent
  The Consumer Financial Protection Bureau provides guidance on forbearance, rental assistance, and how to talk to your loan servicer.
• Unemployment benefits
  If you lose your job or have your hours significantly reduced, you may qualify for state-administered unemployment benefits.
• Job training and reemployment support
  The Department of Labor’s CareerOneStop site connects people to local training, career counseling, and job search help.

How good credit habits can help when the job market slows

Credit scores reflect many aspects of financial behavior, including how consistently payments are made and how much credit is being used. The broader economy plays a role in shaping opportunities and risks, but strong personal habits can help you maintain stable credit even during difficult periods.

A slowing job market might bring added pressure, but it does not automatically lead to credit problems. A proactive approach to managing your personal finances through budgeting, planning, and regular credit monitoring can help avert any negative impact and ensure you stay in control of financial outcomes.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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Your credit score reflects more than just how you borrow. It also responds to how you manage bills, track spending, and make consistent financial decisions. When these actions become part of your daily routine, it can be easier to maintain good credit habits and support long-term financial health.

1. Turning on autopay across your accounts

Autopay helps prevent late payments, which can have a significant impact on your credit score. Even a single missed payment can leave a lasting mark. Setting up automatic minimum payments on credit cards, loans, and utilities can reduce that risk. You can still aim to make extra payments manually to pay down balances or avoid interest.

Try this: Set up autopay for the minimum amount due on all credit accounts, then pay off additional amounts manually when you know your cash situation later in the month.

2. Paying your credit card weekly instead of monthly

Credit utilization is the amount of credit you use compared to your total limit, and it plays a significant role in your credit score. Even if you pay your card in full each month, a high balance at any point in the billing cycle can increase your reported utilization. Making weekly payments helps lower your balance, which may help support your score.

Try this: Choose a frequently used card and make a payment each week to help keep the balance in check.

3. Assigning one subscription to a credit card

A recurring charge such as a streaming service can help keep a credit card active. Using a credit card for a small monthly bill and paying it off in full each month supports payment history while minimizing the risk of overspending.

Try this: Pick one stable monthly subscription, connect it to a card you rarely use, and automate billing and the full payment every month.

4. Choosing a credit-building tool

Some banks and fintechs offer tools like secured credit cards, rent or utility payment reporting, and credit monitoring. These options can help you build positive habits and strengthen your credit using accounts you already manage.

Try this: Explore available credit-building tools and see which one fits your needs and goals.

5. Putting a utility bill in your name

Utility payments are not typically reported to credit bureaus unless you use a third-party service that shares that information. Taking responsibility for a household bill may give you more control over payment timing, and opting in to a reporting tool can help include those payments in your credit history.

Try this: If possible, take over one shared bill, such as internet or electricity, and explore services that allow you to report on-time payments.

6. Living in one place longer

Frequent moves increase the risk of lost mail or missed bills, perhaps leading to late payments or collections. A stable address supports better bill management and may help lenders see you as more reliable. If moving often is necessary, digital billing and mail forwarding can help reduce disruptions.

Try this: When possible, stay at one address for at least 12 months. If not, switch to paperless billing and set account reminders.

7. Using rent reporting services

Most rent payments do not appear on your credit report unless you take action. Some third-party services allow renters to report payments even if they are not on the lease, but success depends on landlord participation and reporting practices.

Try this: Sign up for a rent reporting service that integrates with your payment method and check which credit bureaus they report to.

8. Reducing regular expenses wherever possible

Lower monthly costs can help ease financial pressure, making it less likely you’ll miss a payment or carry a high credit card balance. Staying on a shared phone plan is one example, but any recurring expense you can trim may support better money management.

Try this: Review your regular bills and look for options to share, reduce, or eliminate costs that don’t need to be individual.

9. Turning a hobby into extra income

Earning a little extra money from a hobby or side gig can help you cover bills without leaning on credit. A modest income stream may allow you to pay down balances, avoid overdrafts, and make more consistent payments, supporting healthy credit habits.

Try this: Sell handmade items, offer a service, or teach a skill online. Use the extra income to cover at least one regular expense.

10. Opening a credit card for strategic use only

If you have limited or no credit history, opening a new card can help establish a positive payment record. Assigning it to one small recurring expense and paying it off monthly keeps your utilization low and adds to your credit file. It is important to manage the account responsibly.

Try this: If you are building credit from scratch, consider a secured or low-limit card and use it only for one predictable monthly charge.

The way you choose to live affects your credit

Building credit doesn’t always require major changes. In many cases, simple lifestyle choices, from automating bills to managing shared expenses, can help support responsible credit use. By understanding how daily decisions affect your credit profile, you can take steady steps toward better financial health over time.

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When someone passes away, their financial footprint does not vanish overnight. In fact, credit reports may remain active for years unless the proper steps are taken. Understanding what happens to credit scores, reports, and outstanding debts after death can help surviving family members avoid unnecessary stress, fraud, and delays in estate settlement.

Credit reports do not close automatically

A person’s credit report is not erased the moment they pass away. Instead, once a credit bureau, Experian, Equifax, or TransUnion, receives official notice of the death, it flags the report as “deceased.” This status prevents new credit from being issued and acts as a safeguard against identity theft.

The flagged credit report is eventually deleted, typically seven years after being marked as deceased. Until then, it remains in the credit bureau’s system but is not accessible to lenders or used in credit scoring.

How to notify the credit bureaus of a death

Credit bureaus may receive death notifications from various sources, but the most reliable and timely method is a direct report from someone with legal authority.

Who can notify the bureaus?

Only a legally authorized individual, typically a surviving spouse, court-appointed executor, or estate administrator, can file a direct death notice with the credit bureaus. The Social Security Administration (SSA) and creditors may report the death eventually, but those updates can be delayed.

To notify the bureaus directly, the authorized person will need to provide:

• The deceased’s full name, Social Security number, date of birth, and date of death
• A certified copy of the death certificate
• Documentation proving legal authority to act on behalf of the deceased (such as executor papers or court appointment)
• Their own contact information for follow-up

How to submit the documents

You only need to contact one of the three nationwide credit bureaus. Once notified, that bureau will share the information with the other two. Submissions can typically be sent by certified mail or uploaded online.

Here’s where to send the information:

• Equifax. Equifax Information Services LLC, P.O. Box 105139, Atlanta, GA 30348-5139
• Experian. Experian Consumer Assistance Center, P.O. Box 4500, Allen, TX 75013
• TransUnion. Submission instructions available on the website.

It is a good idea to use certified mail or another trackable method and to keep copies of all submitted documents for your records.

Once the credit report is flagged as “deceased,” it will be sealed and protected from future credit activity, helping prevent fraud and identity theft.

Review credit reports to identify active accounts

After reporting the death, the estate’s executor or court-appointed administrator should request the deceased’s credit reports from all three major bureaus. Not all creditors report to every bureau, so reviewing all three ensures a more complete picture of any outstanding accounts or obligations.

To obtain the reports, the requester must provide a certified death certificate and legal documentation showing their authority to act on behalf of the estate.

This review can reveal:

• Active credit accounts
• Joint or cosigned accounts
• Potential signs of identity theft
• Contact details for creditors who should be notified

Even accounts with zero balances should be closed unless another person is still listed as a joint account holder.

What happens to the deceased’s credit score?

Once a report is flagged as deceased, the individual’s credit score is no longer updated or used. However, the report’s historical content may still be referenced for estate settlement. For example, a creditor may verify existing debts before approving claim payouts or releasing certain assets.

Scores become irrelevant as soon as the credit file is sealed, though the underlying credit report may remain available to authorized individuals for several years.

Who is responsible for debt after death?

In most cases, debt is paid from the deceased’s estate, and not by surviving family members. The executor uses estate funds to pay off valid claims before distributing remaining assets.

Exceptions may apply if:

• You co-signed a loan or credit card.
• You shared a joint account with the deceased.
• You live in a community property state, where marital debts are shared.
• State law assigns certain debts, such as medical bills, to surviving spouses.

Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Optional agreements may apply in Alaska and Oklahoma.

It is a good idea to consult a qualified estate attorney to determine responsibilities based on your location and relationship to the deceased.

Are any debts forgiven after death?

Some debts may be canceled when a person dies:

• Federal student loans are automatically discharged. Parent PLUS loans are also forgiven if the parent or the student passes away.
• Private student loans may be forgiven, depending on the lender’s policy.
• Unsecured debts (like credit card balances) may be written off if the estate lacks the assets to pay them.

State laws may influence how remaining estate funds are prioritized between creditors and surviving dependents.

Protecting against identity theft

Even after death, an individual’s personal information can be used to commit fraud. Thieves may use publicly available details, such as those in obituaries, to apply for credit in the deceased’s name.

To help prevent this:

• Report the death to a credit bureau quickly.
• Review the deceased’s credit reports for unusual activity.
• Notify lenders and close unnecessary accounts.
• Avoid sharing sensitive personal information publicly.

These steps can prevent further loss during a difficult time.

The final countdown

Understanding what happens to a credit score and credit report after death helps families avoid identity theft, resolve loose financial ends, and settle estates with less confusion. Notifying credit bureaus and reviewing reports quickly can prevent serious issues during an already difficult time. It is one of the last (but most important) things you can do to protect a loved one’s financial legacy.

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Early lending was all about personal judgment

Before credit scores existed, borrowing decisions were based on trust. Lenders evaluated risk by relying on relationships, reputation, and perceived character. If a borrower seemed reliable or had a known employer, they might get approved. If not, they were often denied.

This approach was deeply subjective and inconsistent. It worked in tight-knit communities, but as lending expanded and populations grew more mobile, the need for standardized decision-making became urgent.

Credit reporting took shape before scoring existed

In the mid-to-late 1800s, lenders in the United States began relying on more than just personal impressions. Local merchants and banks formed credit registries to share written records about customers’ borrowing and repayment habits. These early files were manually kept and often included narrative descriptions of a person’s trustworthiness, reliability, or employment history.

In 1899, the Retail Credit Company was founded in Atlanta to centralize this kind of information. The company, which later became Equifax, sold consumer credit reports to lenders and insurers. These early reports did not include numerical scores or statistical models, but they marked a turning point, moving credit evaluation from word-of-mouth to documented records and setting the stage for future scoring systems.

Credit bureaus and scoring models emerged in the 20th century

In 1956, engineer Bill Fair and mathematician Earl Isaac founded Fair, Isaac and Company, the firm that would later become FICO, with the goal of using statistical modeling to support better business decisions.

By the mid-1900s, credit reporting companies like Equifax were expanding their data collection operations. In 1968, TransUnion entered the market and quickly became a national player. These bureaus enabled lenders to access structured records on account types, balances, and repayment behavior. This shift laid the groundwork for algorithmic scoring and brought more consistency to credit decisions.

In 1989, FICO launched the first widely used general-purpose credit score for consumer lending. Their model applied a consistent algorithm to credit report data to predict how likely someone was to repay a loan.

This scoring model allowed lenders to move beyond subjective judgment and make faster, more consistent decisions. Over time, the FICO score became the industry standard for evaluating consumer credit risk and remains one of the most widely used scoring systems in the United States.

Standardized scores become mainstream

In the 1990s and early 2000s, credit scoring became central to nearly every consumer lending decision. Mortgage lenders, credit card companies, and auto financiers began using scores as part of their automated underwriting processes.

FICO developed industry-specific versions of its scoring model, allowing lenders to tailor decisions to different types of credit. TransUnion expanded its role in the consumer credit landscape during this time, growing alongside Equifax as a major source of credit data. In 1996, the U.S. credit bureau operations of TRW, a major credit reporting company active since the 1960s, were acquired and rebranded as Experian, completing the trio of national credit bureaus that dominate the industry today.

In 2006, the three major credit bureaus Equifax, TransUnion and Experian introduced VantageScore to offer a consistent scoring model across all three databases. It was also designed to include consumers with limited credit history who might be overlooked by traditional models.

By this point, credit scoring was not just a tool but a cornerstone of modern lending. Scores were algorithmic, rules-based and standardized, marking a major departure from the personal assessments of the past.

Modern credit scoring is based on algorithms

Today’s credit scores are still built using algorithms. These models apply defined rules to credit data to generate a numerical score that reflects a person’s credit risk. Common scoring factors include:

• Payment history. Whether bills are paid on time.
• Credit utilization. How much of available credit is used.
• Length of credit history. How long accounts have been open.
• Credit mix. The variety of credit types held.
• Recent credit applications. How often new credit is sought.

Most scoring models use statistical methods such as logistic regression. Their structure is designed to be explainable so that both lenders and consumers can understand how decisions are made.

Machine learning enters the picture

Over the past decade, some lenders and credit scoring developers have begun integrating machine learning into their processes. Unlike traditional models, machine learning can identify patterns in large datasets that were previously too complex to detect.

Rather than replacing algorithms, machine learning is often layered on top to enhance accuracy. It can improve predictions, allow the use of alternative data like rent or utility payments, and adapt more easily to shifting borrower behavior.

Some lenders have built their entire risk models using machine learning, while others use it for specific tasks such as fraud detection. However, because these models are less transparent, they raise concerns about explainability and fairness.

Fintechs diversify credit access and management

Fintech (financial technology)companies are reshaping how credit is understood and accessed. Some focus on developing alternative scoring models, using data such as rent payments, utility bills, bank transactions or subscription histories to evaluate financial behavior. These models aim to assess risk for consumers who may not have traditional credit files.

Other fintechs provide tools that help consumers monitor their credit, track changes in their credit reports, receive alerts about suspicious activity and learn how specific actions may affect their scores. Some offer credit-building products, like secured cards or reporting services for on-time bill payments, to help users establish or improve their credit standing.

Fintech solutions are expanding access to credit insights, offering faster and more flexible evaluations, and helping more people engage with their credit health.

Credit scoring continues to evolve

Credit scoring has moved from reputation to rules, and now toward real-time adaptation. Currently, traditional models still dominate, but machine learning and alternative data are pushing the boundaries of how risk is assessed.

Credit scoring continues to evolve alongside data, technology, and regulation. The challenge is to maintain fairness, accuracy, and transparency as models grow more complex and influential. What began as a handshake has become an algorithmic formula, which continues to change with new data and shifting standards.

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This is not a formal assessment. It will not impact your credit score. But the way you answer these 10 yes-or-no questions might reveal how your habits might be shaping your credit profile. Be honest with yourself, this is for your own insight only. Are you credit smart?

1. Do you pay off your credit cards in full each month?

Paying your balance in full each month means you are not carrying debt from one billing cycle to the next. This not only saves you money on interest charges but also keeps your credit utilization low, both of which are good for your credit score. If you only pay the minimum, interest adds up fast, and you may find yourself stuck in a cycle of revolving debt. Lenders prefer borrowers who manage credit responsibly and pay consistently.

2. Do you know your credit score right now?

Your credit score is a snapshot of how lenders may view your financial trustworthiness. Knowing your score puts you in control. You can track improvements, catch sudden drops, and understand where you stand before applying for loans, credit cards, or even rental housing. Many people do not realize how often their credit score plays a role in decisions that affect daily life. Monitoring it regularly gives you a head start on addressing potential problems.

3. Have you made every payment on time in the past year?

Payment history is the single most important factor in most credit scoring models. A consistent record of on-time payments builds trust with lenders and supports a higher credit score. Missed or late payments — even just once — can stay on your credit report for up to seven years and lower your score significantly. If you have made every payment on time over the past 12 months, that is a strong indicator of credit responsibility.

4. Do you keep your credit usage below 30%?

Your credit utilization ratio is the percentage of your available credit that you are using. Experts generally recommend keeping this ratio below 30%, and ideally lower. For example, if your credit limit is $10,000, try to keep your balance under $3,000. High utilization can make you appear financially overextended, even if you pay on time. A lower ratio suggests you are using credit wisely rather than depending on it.

5. Have you checked your credit reports within the past 6 months?

Your credit score depends on the information in your credit reports, so it is important to make sure that information is correct. Mistakes, outdated accounts, or signs of identity theft can hurt your score and affect your chances of getting credit approval. You are entitled to one free report per year from each of the three major credit bureaus at AnnualCreditReport.com, but many people check more often using a credit monitoring service. Reviewing your reports at least twice a year helps you catch issues early and protect your credit health.

6. Do you avoid applying for credit unless you have a good reason?

Some people sign up for every new reward card or store discount they’re offered, but this can add up quickly. Each application results in a hard inquiry on your credit report, which can lower your score if too many appear in a short time. Opening new accounts without a clear purpose can also shorten your average account age and clutter your credit profile. Applying for credit only when it truly benefits your financial plan helps keep your credit history healthy and easier to manage.

7. Do you still have your oldest credit card open?

The length of your credit history makes up a portion of your credit score. Keeping older accounts open, especially if they have no annual fee and are in good standing, can help boost your score. When you close a long-standing account, it may shorten your average credit age and reduce your total available credit, both of which can impact your score. Even if you do not use your oldest card often, it can still be helping you in the background.

8. Do you use reminders or auto-pay for bills?

Missing payments is one of the quickest ways to damage your credit score, but it often happens simply because people forget. Setting up automatic payments for at least the minimum amount due, or using digital reminders, can help you stay on track. It also reduces stress and gives you peace of mind. Small systems like these can make a big difference in your long-term credit health.

9. Do you follow a budget or spending plan?

Credit health is not just about borrowing. It is also about managing the money you already have. A budget, even if you do not write it down, helps you avoid overspending, prepare for irregular expenses, and make room for paying down debt. Without a plan, it is easy to spend more than you intended and fall behind on payments. A spending plan keeps you focused and can support smarter decisions about credit use, especially during tight financial periods.

10. Do you steer clear of payday loans?

Payday loans and similar short-term lending products often come with very high interest rates and fees. They may seem like a quick fix, but they can trap borrowers in cycles of debt. These loans typically do not help your credit score and can make financial challenges worse. Finding alternatives such as negotiating with creditors, using a credit card with a lower rate, or seeking credit counseling, can be a better path forward.

How credit smart are you?

Your answers can reveal helpful patterns in how you manage credit. This is not a test with right or wrong answers, and your score will not change based on this quiz. But it might help you reflect on your habits. Consider it a quick snapshot of your current approach to credit. Count up your yeses:

1. Do you pay off your credit cards in full each month?
2. Do you know your credit score right now?
3. Have you made every payment on time in the past year?
4. Do you keep your credit usage below 30%?
5. Have you checked your credit reports within the past 6 months?
6. Do you avoid applying for credit unless you have a good reason?
7. Do you still have your oldest credit card open?
8. Do you use reminders or auto-pay for bills?
9. Do you follow a budget or spending plan?
10. Do you steer clear of payday loans?

If you answered “yes” to most of these questions, you may already have habits that support a healthy credit profile. If you answered “no” to a few, that is not a failure. It just highlights areas where you might want to focus next. Credit habits can evolve. Even small changes can make a difference over time, especially when you stay consistent. You can get the most complete view of your credit score with Sesame Grade now.

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Economic ups and downs have been making headlines lately, with new tariffs, market swings, and rising costs putting extra pressure on household budgets. When inflation climbs or interest rates shift, your credit can be affected, sometimes in ways you don’t expect. Staying ahead of these changes starts with understanding how they might reach your wallet.

Managing credit during economic uncertainty is about more than just paying bills on time. It means watching how you borrow, spend, and protect your financial future, even when the headlines overwhelm. You can employ practical strategies to help keep your credit steady, no matter what the economy throws your way.

1. Know where your credit stands

The first step in protecting your credit is understanding your current position. Check your credit score regularly and review your credit reports for errors or unexpected changes. During periods of economic uncertainty, catching signs of fraud or reporting mistakes is useful.

Credit monitoring tools can help you stay on top of changes that might impact your score.

2. Track your spending patterns

When prices rise or income becomes less predictable, your budget might shift without you realizing it. Monitoring your spending helps you spot trouble areas before they lead to high balances or missed payments.

Use a budgeting app or spreadsheet to keep tabs on where your money is going and identify spending that can be trimmed or paused during tight times.

3. Keep credit utilization low

Credit utilization — the percentage of available credit you use — is a major factor in your credit score. Even if you make all your payments on time, high balances can still lower your score.

Aim to use less than 30% of your available credit across all cards. If possible, pay down balances strategically to reduce your utilization and free up credit in case of emergencies.

4. Avoid taking on new debt unless necessary

Lenders may tighten requirements or increase rates during uncertain times, making credit more expensive. Applying for new credit also triggers a hard inquiry, which can cause a temporary dip in your score.

If you don’t need new credit right now, it may be better to hold off. Instead, focus on managing existing accounts responsibly.

5. Set up automatic payments to avoid mistakes

One of the easiest ways to protect your credit score is to pay every bill on time, every time. Even one missed payment can hurt your score and stay on your report for years.

Consider setting up automatic payments or calendar reminders for all your accounts. This small step can prevent unnecessary damage, especially when your financial stress level is high.

6. Stay in touch with lenders

If you’re struggling to keep up with payments, don’t wait until you’re behind. Reach out to your lenders or creditors as soon as possible. Many offer hardship programs, forbearance options, or temporary adjustments that can keep your account in good standing.

Being proactive may help preserve your credit and reduce the long-term financial impact of a missed payment.

7. Watch for changes in interest rates

Economic instability often leads to fluctuating interest rates, especially on variable-rate credit cards and loans. If your interest rate increases, your monthly payments might rise too, even if your balance stays the same.

Check your statements for interest rate changes, and consider transferring balances to lower-rate options if available. You can compare options to see if you can reduce your interest costs.

8. Keep older credit accounts open

The length of your credit history matters. Even if you’re not using an old credit card, closing it could shorten your credit history and increase your utilization ratio, both of which may hurt your score.

Unless a card has high fees, keeping it open (and active with small, regular purchases) can support your score during unstable times.

9. Protect your identity and accounts

Fraud and identity theft often spike during periods of economic stress. Criminals may take advantage of distracted consumers or overwhelmed systems.

Monitor your credit accounts for unfamiliar charges and consider setting up alerts for suspicious activity. Tools can help detect fraud so you can respond quickly, before it impacts your credit score.

10. Make a backup plan for credit access

If the economy continues to worsen, access to credit could shrink. Banks may lower credit limits, tighten approval standards, or close inactive accounts.

To stay prepared, consider building an emergency fund — even a small one — and evaluating your credit options. Know which cards or lines of credit are most stable, and avoid sudden changes that could spook lenders or impact your score.

How to manage credit during economic uncertainty

Staying calm and focused during economic uncertainty can feel challenging, but your credit doesn’t have to suffer. You can protect your score through even the roughest economic waters by monitoring your accounts, staying ahead of payments, and avoiding high-risk financial moves.

Credit monitoring tools, personalized tips, and insights can help you make confident decisions when the economic outlook is unclear. Take small steps now to secure your credit health and keep your financial options open for the future.

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A recent survey found a big jump in the probability that consumers will miss a minimum debt payment over the next three months.

If that happens, it could disrupt the economy, tighten credit availability, and significantly impact credit scores. Beyond these big-picture effects, missed payments can create a financial crisis for any household. Rather than wait for trouble to escalate, it is better to take action before it gets out of control.

Missed debt payment risk highest since April 2020

The Federal Reserve Bank of New York’s February Survey of Consumer Expectations found that the perceived probability of missing a minimum debt payment in the next three months rose sharply to 14.6%.

That’s significant for a couple of reasons. First, the concern about missing payments has been the highest since April 2020. That’s when pandemic shutdowns were setting in, and millions of workers were sidelined.

Thankfully, there’s no pandemic to deal with today. Even so, it says something about how bad the debt situation is when consumers think their chances of keeping up with their payments are as bad as when much of the economy was shutting down.

Secondly, 14.6% of consumers expecting to miss a debt payment is a sharp increase from the 4.14% of consumers who fell behind on payments in the fourth quarter of 2024, according to the New York Fed’s Quarterly Report on Household Debt and Credit. Such a large spike in payment delinquencies would likely have serious consequences.

Consequences of missing debt payments

First, consider the big-picture consequences. When many consumers miss debt payments, lenders tighten lending standards. The Survey of Consumer Finances shows credit availability expectations are already declining rapidly.

Without access to credit, many households would lose the financial flexibility they need to make ends meet. That can cause problems to spiral. Late payments would add to an already unmanageable debt burden. Those missed payments could also cause credit scores to plummet. As a result, access to credit would become further restricted. Lower credit scores would also mean that what credit consumers could obtain may become more expensive.

Credit card debt has already taken on a life of its own

Already, there is evidence of the spiraling effect of debt problems. A recent report on major credit card issuers found that the total credit card debt owed is growing faster than credit card spending.

That suggests credit card payments are generally insufficient to keep up with the combination of spending, interest charges and fees. That means the snowball is growing and heading downhill.

Strategies for avoiding missed payments

If you’re among the growing number of consumers who see missing payments as a distinct possibility, it’s time to take action before your debt problem gets out of hand. Here are some steps to consider:

Stop the bleeding

Ultimately, you’ll have to work on paying down the debt you already have, but the place to start is by preventing that debt from getting any bigger. Immediately cutting excess spending is essential, even if it means taking the credit cards out of your pocket for a while.

Create an emergency budget

Look at every item in your budget to distinguish between what is essential and what can be cut. Even with some basic items like food, there may be room to cut back or switch to cheaper alternatives.

An emergency budget isn’t fun, but it’s temporary. As you pay down debt, you’ll regain financial flexibility.

Look for a side hustle

Adding a little extra income can be a game-changer when it comes to defeating debt. Of course, working an extra job can also be exhausting, but as with your emergency budget, you can look at it as a temporary measure.

Taking on extra work for a while can get you off the debt treadmill sooner. That way, when you return to your regular work schedule, you can enjoy your free time more.

Ask creditors for flexibility

If you cannot figure out how to pay a bill, do not hide from the problem. Figure out how much you can pay now and when you can to make up the shortfall. Then contact the creditor to see if they’ll cut you some slack.

Providing more time, lowering minimum payments, or waiving late fees are some of the ways creditors may help customers who are having financial problems. However, they’ll only do this if you approach them first. You’ll be more likely to get a sympathetic response if you explain why your finances have gotten out of whack and show you’re sincere about eventually paying what you owe.

Refinance high-cost debt

If you have a lot of credit card debt, high interest rates probably add a lot to your debt problem. Find ways to refinance with lower-interest debt, such as a personal loan or a balance transfer credit card. Ideally, do this before missed payments pile up, potentially ruining your credit history and score. Ruined credit can take time to rebuild and may stop you from getting a loan or credit card in the future.

Debt problems tend to creep up on people gradually, but eventually, they reach a tipping point where they get out of control. The best approach is to take action before that point is reached. Addressing missed debt payments sooner rather than later can help protect your credit and financial future.

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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.

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Life can throw curveballs, and sometimes, your credit score may take a hit. Whether it is missed payments, high credit card balances, or unexpected financial stress, it is never too late to get back on the credit wagon. Rebuilding your credit takes time, but with patience and discipline, you can start making progress. It is never too soon or too late to get back on the credit wagon.

1. Review your credit report for mistakes

Your credit report contains important information about your financial history, and errors can negatively affect your score. Start by checking your credit reports from all three major credit bureaus—Experian, Equifax, and TransUnion—to make sure everything is accurate. If you notice any discrepancies, you may be able to dispute them. This step could help improve your credit score if the errors are corrected.

2. Pay bills on time

One of the most impactful actions you can take is to start paying your bills on time. Late payments can have a significant negative impact on your credit score. Set up reminders or automatic payments to ensure you never miss a due date. Paying on time does not guarantee immediate results, But it is an important step toward improving your credit over time.

3. Catch up on overdue accounts

If you have any past-due accounts, getting them up to date is a good idea. Bringing overdue accounts current can help you avoid additional penalties and may improve your score over time. Work with creditors to set up payment plans if needed and avoid letting accounts fall further behind.

4. Reduce your credit card balances

Your credit utilization ratio, or the percentage of available credit you use, is a key factor in determining your credit score. Ideally, you want to keep your credit utilization below 30%. Paying down high credit card balances could lower your utilization rate and help improve your credit score over time.

5. Consider using a secured credit card

If you’re having difficulty getting approved for a regular credit card, a secured credit card might be helpful. With a secured card, you make a deposit that becomes your credit limit. Using this card responsibly could help you build or rebuild your credit over time.

6. Consider using Credit Sesame’s Credit Builder

If you want to rebuild your credit, the Sesame Cash Credit Builder could be a great option. It is a prepaid debit card that allows you to build your credit history by using it for everyday purchases like groceries, utilities, and subscriptions. Unlike traditional credit-builder loans, this option does not require a credit check or security deposit. It reports your on-time payments to the credit bureaus, helping to improve your credit score over time.

7. Limit new credit applications

Every time you apply for credit, a hard inquiry is made, which can cause a temporary dip in your credit score. Too many applications in a short period of time can signal to lenders that you may be a risk. To avoid negatively affecting your credit score, consider limiting the number of credit applications you submit.

8. Keep old accounts open

The length of your credit history accounts for part of your credit score, so it is important to keep older accounts open. Even if you are not using them, maintaining these accounts can improve your credit score by showing that you have a long history of managing credit responsibly. However, avoid accumulating new fees by keeping only accounts you can manage.

9. Diversify your types of credit

A mix of credit types—credit cards, loans, and mortgages—can potentially help your credit score. Responsibly managing different types of credit over time may positively impact your credit score. Be wary of opening new accounts simply for the sake of diversifying as opening too many news accounts at the smae time can negatively impact your credit.

10. Use credit monitoring

Credit monitoring services can help you track your credit score and be alerted to any changes or suspicious activity. Monitoring your credit regularly can help you spot problems early and take action before they negatively affect your credit. Credit Sesame offers free credit monitoring to help you stay on top of your credit health.

Get back on the credit wagon

Improving your credit score is a gradual process that requires consistent effort and financial discipline. You can start working towards better credit by following these 10 steps—checking your credit report, paying bills on time, reducing debt, and establishing new healthy credit habits. Progress may take time, but taking the first step to get back on the credit wagon could move you toward a healthier financial future.

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The Consumer Financial Protection Bureau (CFPB) has approved a rule banning reporting agencies from including medical debt on credit reports. As a result, that debt would no longer directly affect people’s credit scores.

A natural reflex might be to applaud the CFPB’s decision. Nobody likes medical debt, and penalizing people for debt forced on them by unforeseen circumstances, such as a medical emergency, may seem unfair.

However, a closer look suggests that the CFPB’s action may not be the right cure for medical debt. At best, it could be like a medicine that eases a symptom without addressing the underlying illness. At worst, it may prove to be a well-intentioned empty gesture.

What the CFPB rule on medical debt means

By removing medical debt from credit reports and scores, the CFPB hopes to prevent debt collectors from using the threat of damaged credit to coerce consumers into paying. Damage to credit scores can be especially unfair when miscommunication among medical institutions and insurance companies has caused that debt to be reported inaccurately.

According to the CFPB, the new rule will remove $49 billion in medical bills from the credit reports of about 15 million Americans. They estimate that people with medical debt on their credit reports could see their credit scores rise by an average of 20 points.

The issue is that the CFPB does not have a magic wand. It cannot make medical debt disappear. It can be erased from credit reports, but consumers will still owe that debt. As with an illness, ignoring that reality may make the situation worse.

Treating the symptom, not the cause

The appearance of medical debt on a credit report is just a symptom of the problem. The debt itself is the actual problem. Underlying that, inadequate insurance and the high cost of healthcare are the causes of that problem.

As the CFPB claims, removing medical debt from credit reports might give consumers a quick 20-point bump in their credit scores. However, it does not remove the obligation to pay that debt. Creditors can still sue for payment. In turn, paying that debt may impair a consumer’s ability to pay other bills, which could reverse the short-term boost to their credit scores.

The new rule may face hurdles

Besides being an inadequate solution to the problem of medical debt, the new rule may not survive very long.

The CFPB has recently taken several activist positions. They are trying to get things done before a new administration that is more sympathetic to the financial sector comes to power. However, the problem with changing things through rule-making rather than legislation is that a new administration can easily change those rules.

Also, rules wiping medical debt off credit reports may face legal challenges. After all, they require lenders to make decisions based on incomplete information about potential borrowers’ financial condition. If the new administration replaces the advocates for those rules on the CFPB’s staff, the agency may find it difficult to defend those rules in court.

How the new rule could backfire for consumers

Even if the new rule survives, it may not be good for consumers.

Lenders are bound to respond if the rule artificially raises credit scores by excluding certain negative information. They may raise their lending standards to compensate for that boost in credit scores. The result may be that credit would become more difficult to obtain.

Even for specific borrowers with medical debt, the rule might not help them in the long run. If they are approved for a loan they cannot repay because of their medical debt, it will ultimately hurt their financial situation and credit scores. It would be better to acknowledge the reality of their existing debt obligations in any lending decisions.

Consequences of the CFBP rule on medical debt

The rule removing medical debt from credit reports isn’t a perfect solution. While it can temporarily boost credit scores for those with medical debt, the long-term benefits may be limited. As the rule improves the credit scores of individuals with medical debt, others without such debt may feel pressure to take additional steps to raise their scores to stay competitive. This dynamic creates a scenario where the overall credit landscape adjusts, potentially offsetting the initial advantages.

With or without medical debt, there are some more permanent moves you can make to raise your credit score:

1. Keep balances down. Always try to make more than the minimum payment on your credit card bills.
2. Stay on schedule. Payment history is the number one factor affecting credit scores, so try to keep your payments on time.
3. Know where you stand. Signing up with Credit Sesame lets you stay informed of changes in your credit score. It can also provide you with timely tips about what you could do to raise your score.
4. Limit applications for new credit. Pick your spots. That way, new credit accounts and inquiries won’t keep dinging your credit score.

The new medical debt rule brings opportunities and uncertainties, leaving many questions unanswered. To navigate this shifting landscape, focus on proactive steps to strengthen your credit score. Maintaining good financial habits can build resilience and ensure your credit profile stays strong—no matter how the rules evolve.

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You may be surprised at the number of people who have checked their credit reports and found inaccurate information. Finding a mistake on one or more of your reports can be frustrating, but do you know what to do if you find such an error? What inaccuracies could you find, and what happens when you dispute something on your credit reports?

A surprising number of credit reports contain errors or inaccurate information. These errors are frustrating and can have a negative impact on your score. It is a good idea to take care of them right away. Submitting a dispute to the credit bureau is the first step, but what comes next? And what effect does a dispute have on your credit score? The data in this article is from a survey conducted in September 2018 but the lessons and conclusions are the same in 2024.

Who has inaccuracies on their credit reports?

People with fair and low credit scores tend to have more inaccuracies on their credit reports. That’s around one in three. What the data does not tell you is that these inaccuracies may drag your credit scores down, even if behave responsibly with credit.

Why is disputing errors on your credit reports important?

Your credit scores are a direct reflection of the information contained in your credit reports. Few numbers impact your life as much as your credit scores. Think about it: Your credit score is used to determine so many things. For instance, it determines the interest rates that you pay on your credit cards and loans, whether you can afford to buy a new car, the type of house you can afford, and whether or not you get approved for a new apartment or a new job.

Interest rate ranges for different credit score ranks

Your credit scores impact the rate lenders offer for different kinds of loans. The interest rates for those with poor credit are substantially higher than for those with better credit. For instance, if you’re in the market for a car, you could expect a significantly lower interest rate if you have exceptional credit. However, if you have poor credit, the interest rate for the same loan would be much higher, and that’s even if you can get approved for the loan in the first place.

Interest rate comparison for excellent and poor credit

What do different interest rates mean in terms of money saved or spent? If you apply for a 30-year fixed mortgage to purchase a $244,368 house, it would benefit you to make sure that your credit is in top shape before turning in those applications. Why? Because with bad credit, the interest rate on your mortgage loan could be several percent points higher than if you have excellent credit. That may not sound like a big difference, but over the course of the mortgage, it adds up to paying nearly $100,000 more for the same house. When dealing with loans, having bad credit can literally cost you you dollars.

How to dispute an error on your credit report

There are two main ways to dispute errors: with the bureau or with the creditor.

Filing disputes with the credit bureaus

You may file a dispute directly with Experian, Equifax and TransUnion.

Under the Fair Credit Reporting Act, you can have errors removed by submitting a written credit report dispute. Once you submit your report, the relevant bureau must investigate within 30 days (another 15 days if you send in additional information). From there, the bureau notifies the furnisher or supplier of the information, who then has 5 days to dispute your claim. The furnisher must review and investigate and send their findings to the bureau. If the bureau finds the false information found in your credit report to be inaccurate or unverifiable, it will be removed or corrected. What sort of outcomes do consumers see when they dispute credit report inaccuracies?

Of the small number of consumers who filed a dispute, more than 17% received a decision in their favor. It is also worth noting that the resolution didn’t happen overnight. These disputes took an average of 60 days to resolve. Credit Sesame members fared slightly better, perhaps because Credit Sesame provides the information that makes disputing easier. Also, members tend to check their credit reports frequently, whereas non-members may not. If you do not check your credit report, you cannot know if there is an error that needs to be disputed.

Filing disputes with creditors

You can also try filing a dispute directly with the creditor or furnisher. By law, you have a right to dispute the accuracy of any information on your credit report with the company that reported the information. To do this, simply send a letter disputing the specified information the company that provided the information to the credit bureaus (the creditor) must investigate your claim. It’s a good idea to double-check the creditor’s address in case they have a specific address for disputes. The last thing you need is for your letter to go missing or for the resolution to be delayed because it takes longer to get to the right person to take action. What kind of results do people see when they take this route?

Few people file a dispute directly with the creditor. However, among those who have, filing a dispute directly with the creditor yields better and faster results than filing with the credit bureaus. Thirty-two percent of those who filed a dispute directly with creditors saw a decision in their favor, versus 17.5% who filed with the credit bureaus. What’s more, the time to reach that decision was cut in half to 30 days, rather than the 60 days it took when filing a dispute with the credit bureau. Credit Sesame members tend to have a better resolution rate, faster decision time, and are more often to file a dispute in the first place than non-members.

What happens if the dispute is not corrected?

If you are unhappy with the outcome of your dispute, you may be able to submit a brief statement (typically around 100 words) to your credit report. This statement allows you to explain the situation from your perspective. Focus on the facts related to the disputed information and avoid irrelevant details. Credit bureaus might have specific guidelines for these statements, so check with them for details. If you believe the credit reporting agency violated your rights under the Fair Credit Reporting Act (FCRA) during the dispute process, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).

What can happen when you dispute something on your credit reports?

Credit Sesame member Tyler disputed errors on his credit report. This is his story. Tyler is a 45-year-old who works in construction in Des Moines, Iowa. He never really thought about his credit report until he wanted to buy a house for his family. While his wife had good credit, she did not have a high-paying job so the mortgage company required a joint application. When they ran Tyler’s credit score, they found it to be fair. Although they were denied the loan, Tyler was able to request a free credit report and found two major errors that impacted his credit score.

The process is not immediate, but Tyler was able to remedy some of the errors found on his credit report. When one came back from the credit bureau in the creditor’s favor, Tyler submitted a dispute directly with the creditor, who realized the error and removed it.

Don’t be afraid to dispute something on your credit reports

To quickly summarize, a startling number of credit reports contain errors — as many as 39%. Given the importance of your credit to your overall financial health, it is crucial to dispute any inaccuracies you may find in your credit report in a timely manner. You can file a dispute with either the credit bureau or the creditor, although filing a dispute with the creditor directly often results in better, and faster, outcomes.

If you’re concerned about your credit, you can check your credit report from each of the major credit bureaus for free. Since 2020, free reports have been available once a week at annualcreditreport.com, which is more than annually as federal law requires. You can also get your credit score for free at Credit Sesame and if you would like to monitor your credit more closely, sign up for Credit Sesame’s credit monitoring service and use our guides to help your score improve.

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