Managing Your Credit During a Hardship
The COVID-19 pandemic has impacted people all over the world, uprooting normal day-to-day life, closing schools and causing job loss for millions of Americans. During a crisis, lots of things change, but there are some things that remain constant like your mortgage or credit card payments. If you’re ever experiencing a hardship, it can be daunting to realize that it may impact your finances and good standing credit that you’ve worked hard to achieve. That’s why we’re sharing some tips to keep your credit score intact when any uncertain time hits.
Instead of immediately utilizing your emergency fund or putting things on your credit card, opt to search and cut unnecessary charges like streaming services or gym memberships. Pinpoint what services you can live without for the time being and cancel or postpone them. Once you’re back on your feet financially, you can add on things as desired.
Knowing where your money goes each month is going to be crucial during your time of hardship, that’s why it’s important to manage your money and expenses within a budget. If you didn’t already keep a strict budget, a time of hardship is when to make it happen.
Determine how much monthly income goes to necessary or fixed expenses like your rent, electric, water and groceries, then begin to allot what you can to those. As stated above, part of your budgeting process should include a detailed layout of expenses that aren’t necessary, like entertainment. This will help you determine what costs can be cut and help you better manage what funds you do have available.
If you realize you may be late on a payment or won’t be able to make a payment due to a financial hardship, it’s important to take action before this occurs.
The best way to take control is to speak with your lender as soon as you can. They will be able to educate you on the options available to you and help you pick one that works with your situation. Like during the pandemic, many Americans were out of work, but your lender or creditor will most likely have a solution in place and will be willing to work with you regarding options like forbearance or deferment.
If you’re curious how a forbearance or deferment will impact your credit score, refer to the FICO website(Link opens in a new tab).
All in all, it’s important to remember that your credit score is determined by many factors, including your previous record of payments. Make sure you stay up to date on your credit report and check that the contents and information is correct. Ensure that any account in forbearance or deferment is being reported as current, this is required by the CARES Act. If you happen to see errors on your report as you are reviewing, dispute them as soon as possible.
While we may be seeing the light at the end of the tunnel, it’s always a good idea to have a plan if a hardship occurs, whether you’re a soon-to-be home buyer or current homeowner.
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