What can you do to protect your credit in the months to come? Keep reading to learn what you can do on your own to prepare.
Need Assistance? Find Out Who to Call:
First, figure out where you have accounts and what you owe. If you haven’t pulled your free credit report in a while, getting one now will give you a baseline for your accounts and balances. Where can you get a free credit report? You can visit annaulcreditreport.com for a free credit report. They allow you to get one report from each of the three credit bureaus per year.
Don’t Worry About Your Credit Score
If you arrange for deferment or forbearance on your credit accounts, it’s extremely important you understand the terms of agreement, as each lender has their own policy. Make sure to ask a lot of questions such as:
How long will my arrangements last?
Can it be renewed?
Will interest continue to accrue on your account?
You can learn more about mortgage forbearance here.
Your credit score will not go down if you take any of the accommodations offered by your creditors. In March, the CARES act was passed, which stipulates that your credit history cannot be negatively affected by any coronavirus assistance programs your creditor or lender provides, provided your account was current before you asked for help. That means you can defer payments, make partial payments or modify a loan without seeing your score drop.
Also, any relief received either from a stimulus check or expanded unemployment benefits will not be reported to the credit bureaus.
What Steps Can I take To Avoid Falling into Debt During COVID-19?
Use Credit But Only If You Need To
There are some factors that could cause your credit score to drop. For instance, if you need to use credit to get by, a decrease shouldn’t be a surprise. In addition, if you happen to pause payments on your accounts but still need to use credit to pay bills and buy essentials, your credit utilization ratio is likely to increase. In turn, this could lower your credit score.
Budgeting is helpful to keep credit card debt down, where possible. Take a look at how much you’re making and what you’re spending. Identify places where you may be able to trim usual costs. Come up with a plan to pay off debts after the pandemic is over. Eventually, your score will go back up. Remember, don’t overuse your credit; use it for things you need the most.
Call your Lenders/Creditors
Like we mentioned earlier, talk to your lenders and creditors to discuss any and all options.
Pay What You Can
Ideally, you’ll pay your credit card bill in full every month. If credit cards aren’t paid in full every month, added interest payments can prolong debt. If you’re not able to pay in full, then aim to pay whatever you can, at least the minimum payment if possible. Not making a payment at all could further impact your credit standing.
Use Your Stimulus Check
For those qualify, you could use this check to pay your monthly payments, pay down your debt, or use the money to cover your day-t0-day essentials so you don’t need to use revolving credit accounts which increase the amount of debt you now.
Be Wary of Scams
Be alert when receiving strange phone calls, emails and text messages. If something doesn’t look right, don’t open it. If you receive a message regarding a financial account, it’s best not to click on any links or give out your personal information. Look on the back of your billing statement or card for a customer service number where you can call to ask about the message you received. They will be able to tell you if it was indeed legitimate and they will be able to provide more information.
You can also help protect your identity by going to trusted sources for information. Experian has a list of coronavirus customer service links for financial institutions, and TransUnion offers a directory of additional services you may be looking for at this time. If you’re applying for unemployment, make sure you’re accessing the legitimate unemployment application for your state by going through benefits.gov, which has a state directory.
Falling victim to a scam can have long-term implications for your credit and can even result in identity theft. Learn more about the most common types of scams and what you can do to protect yourself here.
Ask for help if you need it, pay what you can, stay up-to-date on your credit reports, and watch out for scammers during the COVID-19 pandemic.
We understand the COVID-19 pandemic has caused a lot of uncertainty about the future. To help you find the most accurate information as it relates to your mortgage, personal finances, the home buying process, and more, visit our Incident Resource Center here.