How to Manage Your Credit Score During a Crisis

Everyday there is information in the news, on social media and even into our communities about the number of cases of Coronavirus or COVID-19. This pandemic has caused lots of financial and mental stress. This virus has impacted all of us either through lay-offs at our job, being sent home because we contracted the virus, and just the concern that we have as the virus affects the overall economy of our communities, country and world. Emotions are running high due to the uncertainty of the effects of the coronavirus. We don’t need to lose hope. We are all in this together and we will make though the pandemic. Knowledge and planning can help you to take control of your money to help you work through the situation and preserve your credit score. If you have been impacted by COVID-19 with a layoff or furlough from your job, you are facing the unintended consequences of your ability to pay your bills. Putting a plan together can allow you to remain calm and process the situation you are facing.

Get on a budget – If you don’t have a personal budget, now is the time to put one together. A monthly budget will show you exactly where your money is going. With a budget you can stretch your dollar to go farther and determine how much money you have to work with. Review your checking account statement, your credit card statements to determine where you are spending your money. Some items are on automatic draft and we forget those bills. You may need to cancel them. Determine if your expenses and bill necessary and essential. You can use a notepad, excel spreadsheet or a budgeting app, such as EveryDollar to put your budget together. Now is the time to squeeze every penny out of what you have got.

Take care of the Four Walls – When it gets rough going like it is now, you need to focus on those items you really need to survive. Your priorities should be Food, Utilities, Shelter, Transportation. Taking care of these four basic items can keep you going to fight another day. If there is no food in the “Frig”, don’t pay the cable bill. After you have taken care of the four walls, then you can determine where you spend your money from the list of bills to pay. You need to prioritize where you spend your money. If you have having problems paying your house payment or rent. Reach out to your bank or landlord and tell them what you are facing to see if there is anything, they can do for you. Be honest and truthful when you communicate and provide a list of items that you have cut from your budget to make ends meet.

Look for Things to Cut from Your Budget – Cut back on unnecessary expenses. Stop, downgrade, or pause subscriptions to services that you can get by without. Contact your providers to see if there is anything they can do during this time. This can free up funds to pay creditors

Preserve your Credit Score - When it comes to preserving your credit score, make your loan payments on time. As an example, a late payment is a payment that is 30 days or more past the due date. If you are more than thirty days past due, that can lower your credit score. Late payments on your credit can linger on your credit report for up to seven (7) years. Another practice is to try not to add to the loan balances on your credit cards. Try to keep the proportion of loan balances to the credit limit on credit cards low. Try to keep the loan balance below 30%. Pay your minimum payment to keep from having a late payment on your credit score.

What to Do if You Cannot Make Your Payment - If you need relief and before your next payment is due, contact your bank and other creditors before the payment is due to discuss your situation. Your lender will likely have a process to work with customers impacted by this unique health emergency. Federal and State regulatory agencies have issued guidance to lenders encouraging financial institutions to work constructively with those consumers and small businesses affected by the Covid-19 pandemic. You might be able to defer a payment or be given forbearance on your loan payments. The placement and reporting of a loan account in forbearance or a deferred payment plan does not negatively impact your credit score. Each lender probably has unique policies dealing with requests to defer a loan payment or put a loan in forbearance, so you should contact each lender to discuss your situation. If you can meet with the lender in person, that goes a long way to get a loan deferment plan put together. Be honest and kind.

Monitor Your Credit - It is Important to watch for fraud that could affect your credit score and create a bigger headache. You are now entitled to one credit report every week from each of the three major credit bureaus though April 2021. Check to make sure that you identify every account. If your account was in good standing before any pandemic-related concessions were made, such as forbearance or deferment, check to verify that the account is being reported to the credit bureau as current as required by the CARES Act. You can also have a disaster code added to you credit report if you request it. The reason you may want to put the disaster code on your credit report is to help a landlord understand changes in your credit behavior. This will not hurt your credit score. If you see errors, contact the credit bureau, and dispute them. An error can suggest identity theft.

David Lantz
Senior Vice President
davidl@frontierbk.com