November 5, 2020
Shawn Lane
Consumer Credit Expert
2020 has put a lot of people in financial positions they never imagined being in. Entire industries have dried up as a result of the Covid-19 pandemic, and even the most reliable jobs now carry the risk of being laid off or furloughed.
Those who have never been in this situation might be worried about how it could affect their credit. Here are some tips for maintaining a high credit score when you’ve been laid off.
Avoid Missing Payments
The biggest potential problem for unemployed borrowers is missing payments on their loan or credit card accounts. Missing just one payment could cause a huge drop in your credit score, sometimes by as much as 180 points.
If you’re close to missing a payment, contact the lender beforehand. They may have a temporary hardship program or special grace period. Some companies may only be willing to help if your account is still current.
Lower Your Bills
Reducing your bills leaves more room to cover the essentials when you’ve lost your job. Utility companies, cell phone providers and internet companies often have discount programs for low-income individuals.
Contact them and ask what programs you qualify for. You’ll likely have to provide a pay stub or tax return as proof. If you used to be a high-earner and were laid off, include a letter from your employer that shows you no longer work there.
Make a list of your providers and ask them for a price reduction. You never know what they can offer you. Some may have information online on how to apply for hardship assistance. If you can’t find anything on the web, call them directly.
Pause Payments on Loans
Some mortgage and auto lenders let you skip payments temporarily if you lose your job. They may continue to charge interest during the deferment, along with a small one-time fee.
If you sign up for a loan deferment program, ask if the missed payments will be added to the end of the term, or if you’ll owe a lump sum when payments resume. It’s crucial to understand the difference so you’re not surprised when the mortgage company sends a bill for three month’s worth of payments.
Federal student loans come with deferment and forbearance options for borrowers who lose their jobs. Borrowers have to apply for these programs manually. Interest may still accrue during this time, depending on the loan. These programs last for one year at a time, but can often be extended for a total of three years.
Federal borrowers may also be eligible for income-driven repayment plans, which may drop to $0 for unemployed individuals. Borrowers with private student loans may also have access to deferment and forbearance programs. They’ll have to call their lenders to view these options.
Minimize Credit Card Debt
Borrowers with credit card debt should call the card issuer directly and ask them to lower their interest rate. Remind them that you’ve been a loyal and responsible customer and ask what they can offer you.
If that doesn’t work, try opening a new card with 0% APR on balance transfers. If you initiate a balance transfer to a card with no interest, you could save hundreds. Make your minimum payments on time or you could lose access to the 0% APR.
Monitor Your Credit Score Regularly
Make sure to check your credit score and credit report on a regular basis. Due to the Covid-19 pandemic, you can check your credit report for every week until April 2021 at AnnualCreditReport.com, but without credit scores. You can also go to www.frscredit.com/creditmonitoring and pull all 3 credit reports and scores for just $1 for a 7-day trial period.
Viewing your score on a regular basis will help you see if your score is decreasing. It will also help you spot any errors or mistakes soon after they happen.
We can help you reach your credit goals. Schedule a free credit analysis with a Financial Renovation Solutions credit consultant today.