If you’ve heard it once since March, you’ve probably heard it thousands of times: The word “unprecedented.”
Sadly, there just isn’t a better word to describe what we’re living through. The COVID-19 global pandemic is like nothing the current generations of Americans have ever seen in our country.
Stay-at-home orders, social distancing, and the ensuing economic crisis have fundamentally shifted our daily lives. As a result, many people are facing difficult financial situations. Even those who work with or are quite familiar with personal and consumer credit could have difficulties.
Credit reporting continues
Even so, lenders are still reporting data to the four major credit bureaus. This means that serious financial oversights stemming from the pandemic could have long-lasting effects on your credit. Skipped credit card payments, missed payments on auto loans, or unpaid rent could have drastic consequences. In addition to closed cards, repossessed cars, and evictions, you could face near-decade-long negative credit records on your report.
However, there’s another phrase a lot of people have adopted during COVID-19: “We’re all in this together.” Millions of Americans are facing the same financial troubles, and business and government leaders understand these are extremely difficult times. As such, there are several things you can do to keep your credit report and credit rating intact during this crisis. The key word here, though, is “you.” It’s up to you to take action to protect your financial future.
Contact your creditors
A prime example of taking responsibility for your own debt is to reach out to your creditors. Even though lenders know what’s going on, they still need to hear from you about your personal situation. Few, if any, are going to call you up to see how you’re doing. Instead, they’re waiting for you to make the first move.
Even if you contact them, though, it’s up to the creditor whether or not to offer allowances during the COVID-19 pandemic. For example, some property managers are waiving late fees or forgiving a month’s rent. Others aren’t. Some auto dealers are delaying payment due dates or ceasing repossessions until the economy improves, while others haven’t changed a thing. You probably won’t know what they can do to help you until you talk to them.
When you speak to your creditors, be honest about your current and near-future financial situation. Don’t exaggerate the seriousness, but don’t overpromise, either. Do your homework before you call so you have on hand your current and potential income as well as your expenses. Be specific about how COVID-19 has impacted you financially, and what you’ve done to help yourself, such as taking advantage of unemployment benefits. Your creditor may be able to take these facts into consideration as he or she works with you to help you repay your debt.
Lastly, be sure to get any agreements with your creditors in writing. Just like you, lenders are human, and can make unconscious errors. You’ll want this written confirmation just in case your conversation and the agreed-upon allowances go unrecorded.
Keep an eye on your credit report
The Consumer Financial Protection Bureau (CFPB) and other agencies always recommend checking your credit report at least once a year. Each of the three major credit bureaus (Equifax, Experian, and TransUnion) provide one report to each consumer annually at no charge. To access your report, visit AnnualCreditReport.com.
Additionally, as a result of its 2017 data breach, Equifax allows consumers to order six free credit reports each year through 2026. You must first create a free “myEquifax” account to access these, though. Obtaining these six reports or the reports through AnnualCreditReport.com will not impact your credit score at all.
Once you receive your reports, review them carefully for any errors or fraudulent information. Unfortunately, an unstable economic situation like the pandemic is a prime time for fraudsters to take advantage of distracted consumers.
Also, as we mentioned earlier, creditors are handling requests from millions of consumers just like you, and not every agreement is the same. Be sure to check your credit report for any allowances your creditor agreed to during the pandemic. For example, if they have agreed to let you skip a payment or pay it late, you’ll want to be sure that payment isn’t inadvertently reported as delinquent or missed.
If you find an error with a creditor’s reporting on your credit report, contact that lender directly to file a dispute. You may also mail a dispute letter to each credit reporting agency whose report reflects the error.
Make personal financial adjustments
This may go without saying, but if you’re in a financial bind, the first cuts to make should be to your discretionary budget. Even though fancy lattes and restaurant lunches have been curbed due to social distancing, you may still be spending too much on online shopping or unnecessary groceries.
Your first step is to give your expenses a long, hard look to be sure you know where your money’s been going. Next, make a plan for where it needs to go from this point on. If there are any expenses that can be cut, even temporarily, make those changes as soon as possible. Even saving a small amount every day can add up to a much-needed debt payment.
You may still be holding on to your government-issued CARES Act/COVID-19 stimulus check, or maybe you’re waiting for the next one to be approved. Be sure this money is spent as it was intended to be used — on necessary living expenses or to keep you from going deeper into debt. If you’re able to pay everything on time during the pandemic, use this money to create or beef up your emergency fund.
Lastly, be sure to take advantage of every opportunity to save or make money. Sell your unwanted or unneeded clothes or household goods online or offer your professional services as a freelancer. Many places, like delivery services or certain retail stores, never slowed down during the crisis, and are still hiring. This might be the time to explore a part-time gig! Also, the government is still accepting applications for unemployment benefits, which include generous stipends in addition to your regular allowance.
Speak Your Mind