Keeping Score

How your stimulus check can help you improve your credit score

If you don’t need the extra money for everyday expenses or your savings, consider using it to pay down any big card balances you may have


If you have a regular paycheck and an emergency fund equal to at least six months to a year of expenses, you can use this windfall to improve your credit score in a couple of ways, including reducing your credit utilization.

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One of the most important features of the massive coronavirus-inspired CARES Act is the payments aimed at providing relief for individuals and businesses that have been negatively impacted by the COVID-19 outbreak.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples and up to $500 for each qualifying child.

There are income thresholds that determine if you receive the full payment or only a portion. Tax filers with an adjusted gross income of up to $75,000 for individuals and up to $150,000 for married couples (filing joint returns) will receive the full payment. The payments are either reduced or phased out for taxpayers earning above those levels.

Economic impact payments will begin in April and will be distributed automatically, with no action required for most people.

Check out all the answers from our credit card experts.

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How can your stimulus payment help your credit score?

The government hopes you will use your stimulus check to buy things that will help keep the economy going. I, however, am more specifically concerned with your personal economy as represented by your credit score!

If you are one of the lucky Americans who is still getting a paycheck, you may not need additional cash to buy more than you already do. No matter what your circumstances, though, I would suggest you be smart about how you use these one-time funds.

If you have a regular paycheck and an emergency fund equal to at least six months to a year of expenses, you can use this windfall to improve your credit score in a couple of ways.

If you have multiple credit cards with balances, look at those that may be on the higher end of utilization (above 25%) and see if you can bring those rates down.

To refresh your memory, credit utilization counts for 30% of your FICO score and is extremely influential in determining your VantageScore. Bringing your utilization rates down will bump up your score, especially if you are on the higher end with your card utilization.

Alternately, you might be able to completely pay a card off with the stimulus money and then have that card available for your everyday purchases without incurring interest charges.

You can also use your stimulus cash as a “reserve” fund to make minimum payments on a card balance you can’t pay in full right now. That will ensure you keep a positive payment history, and it may free up more of your regular earnings for everyday expenses or an emergency fund.

What to do if you’re unemployed or don’t have adequate savings

It is my standard advice to save half of any “windfall” type of money, like bonuses or this payment. This economic impact payment check falls into that “windfall” category and as such, I would normally urge you to save at least a portion of this money in your emergency savings account. If you already have such a fund, this will pad your cushion. If you don’t have one, this will give you a good start.

Standard advice does not work in nonstandard time. And now is anything but a standard time!

  • If you are currently unemployed or have had your work hours reduced, I suggest you protect your cash because you can’t easily replace it. Use credit to get you through the next few months and use cash and this payment to make only minimum payments on your cards. Yes, you will accrue interest, but that’s minor compared to running out of cash. (You might also check with your issuer to find out if they can offer you a lower interest rate.)
  • If you are working but don’t have a fully funded emergency fund: As long as you have your normal paycheck and you are meeting your expenses with your income, put your entire economic impact check into your emergency fund. If you don’t have one, start it now and put all of any windfalls, bonuses or refunds in the account until you reach between six months and 12 months of expenses. Remember, your goal is to replace only your expenses, not your full income.

Is my stimulus check a loan?

It is difficult to know how long this pandemic will last and how severely the economy and your personal finances will be hurt. My suggestion is to use your stimulus checks in ways that will help you the most, no matter how tempting it may be to spend it all at once.

I want my readers to know that the stimulus payments are not a loan that you will have to pay back. It’s technically a tax credit to your 2020 tax bill applied ahead of time. The money is tax-free and will not be calculated as income for 2020.

Remember to keep track of your score!

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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