Credit Scores Since the COVID-19 Outbreak Credit Scores Since the COVID-19 Outbreak

By Michal Kowalik, Lily Y. Liu, and Xiyu Wang

We study the drivers behind the increasing households’ credit scores since the onset of the pandemic. We argue that the main driver is falling credit card utilization. This effect is most visible for households with the lowest credit scores; these households saw the highest increases in credit scores and the largest decreases in credit card utilization. We also show that the forbearance programs shielded individual households’ credit scores from significant credit score penalties. However, given the relatively low share of the population enrolled in these programs, these programs were not a significant driver of the increasing credit scores. Our findings provide important guidance to policy makers and lenders about the causes of the recent credit score increase and on expectations of how credit scores may change once the extraordinary policy initiatives from the pandemic recede.