Remote work isn’t a brand-new concept, but it became commonplace during the COVID-19 pandemic. As a result, many employers have continued to embrace it, allowing their employees to work remotely full-time or part-time, even as COVID restrictions have become relaxed.
Remote work has changed the way millions of workers do their jobs, and it can have larger implications for work-life balance, business costs and even consumer credit scores. So, while working remotely won’t have any direct impact on your credit one way or the other, it can affect your credit scores indirectly.
Here’s how working from home can positively or negatively impact your credit scores.
How Remote Work Expenses Affect Your Credit
The costs associated with working from home vs. working onsite can affect your credit scores when it comes to your credit utilization ratio, or the amount of available credit you are currently using. If your credit utilization ratio is too high, it can lower your credit scores.
Working remotely may reduce your overall expenses. For example, you might eat fewer meals out, spend less on office attire and eliminate commuting costs like gas or public transportation. Suppose you typically use your credit card for these purchases. In that case, your reduced spending can lower your credit utilization and positively impact your credit scores, as long as you don’t increase your spending elsewhere. And if you’re saving money on those purchases, you can pay more toward your debts, lowering your credit utilization even further.
On the flipside, working from home can cause you to spend more on your credit card and increase your credit utilization – at least temporarily. You might have to make purchases for your home office like office supplies, a computer, or furniture. If you charge those items to your credit card and you (or your employer) don’t pay them off quickly, they can affect your credit utilization ratio and can negatively impact your credit scores.
The best strategy for maintaining low credit utilization is to pay off your credit card purchases in full every month. This way, you can avoid paying interest on your credit card balance and keep your credit utilization at a reasonable level.
How Remote Work Can Affect Your Credit Accounts
- Taking out a mortgage to purchase a home with space for a home office.
- Selling your car and paying off your car loan because you no longer commute.
- Opening a store credit card to buy office furniture.
Having new or different credit accounts does not necessarily affect your credit scores for the worse. In fact, having a healthy mix of revolving accounts, such as credit cards with variable monthly payments, and installment accounts, like a mortgage with a fixed monthly payment, can help your credit scores.
It’s tough to predict whether opening or closing an account can positively or negatively impact your credit scores. It’s highly dependent on the type of credit account, the nature of the other debts you hold, whether you have any late payments and other factors. But a good rule of thumb is affordability – if you can easily afford your debts and always make your payments on time, you should be in good shape.