I find myself eleven weeks into quarantine and settling in to the realization that this is the new normal, for the time being. As this pandemic continues to unfold, I am more aware than ever before that not only is this a physical pandemic, it is an economic one, too. The forty million people who filed for unemployment in the past five weeks are undeniable evidence of that.
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I continuously ask myself what I should be doing to help people keep their heads above water. The answer I keep coming up with is teaching folks what they need to know to avoid getting in financial trouble in the first place. That’s a really big part of personal financial philosophy. So, in order to help with you with that, I want to take a few minutes to talk about how to keep your credit in the best possible shape while we navigate these trying times.
Right now, the last thing we should be worrying about is our financial wellbeing. I get that. However, this situation will not last forever and at some point, the economic engine of our nation will have to be fired back up. People will need access to credit to get things moving again. For that reason, it is in your best interest to try to keep your credit under control while we wait for the economy to gain momentum. Here are some steps you can take to keep your credit sound in the days and weeks to come:
- Check your credit reports. One good thing that is happening is that the big three credit reporting agencies, Equifax, Experian and Transunion, are allowing consumers one free credit report per week from annualcreditreport.com. Federal law requires that each of the three credit reporting agencies give you access to one free credit report per year through that same website. Now you can get them once a week. I strongly suggest checking your credit report for accuracy regularly because your credit score comes from what’s in your credit report. They need to be right!
- Make your payments on time. Now, more than ever, it is critical that you pay your payments on time. My research is telling me that credit card companies are looking for evidence of creditworthiness. If you are low on the creditworthiness scale, credit card companies could reduce your credit limit or close unused or dormant accounts. That would lower your credit score pretty quickly by increasing your credit utilization ratio (the amount of credit you are using in proportion to the total amount of credit you have available to you). The most important thing you can do to keep your credit in shape is to pay your bills on time, it counts for one third of your credit score!
- Communicate with your creditors. If you can see that you are about to have problems paying your credit card bills, call your credit card company sooner rather than later and ask for help. While this may give them a head’s up that you are having trouble financially, it’s still better for you to avoid negative entries on your credit reports by getting assistance with your balance than it is to suffer a reduction in your available credit. You can always ask for a credit increase when your economic situation improves but a negative entry on your credit from a missed payment last for seven years.
- Be careful when using credit cards. I know we are in difficult economic times right now and that may mean you have to temporarily rely on credit cards for basic needs. However, know that is a short term option and that you shouldn’t use credit that you can’t reasonably expect to pay back in the near future. If it means you can only make your minimum payment for a while, so be it. Just be aware that long term survival on credit is never an option.
- Make sure debt payments are accurately reported. The CARES Act has provisions in it that dictate how creditors report payment information to credit reporting agencies during the pandemic. If you have an agreement with your creditor that allows you to change your payments in some way, the creditor should not report the agreed upon payment changes negatively on your credit reports. However, it is up to you to make sure your credit reports are accurate pursuant to your agreements with your creditors.
While no blog about credit can replace lost income, I hope this post has given you some good advice about steps you can take to keep your credit in shape for the time being. I have said many times that maintaining a lifestyle is not the goal, right now. If we can stay financially stable throughout this economic situation, I count that as a definite win.
Stay safe, healthy and well.
Joy Alford-Brand
Your Dollar Lama
P.S. Make sure you check out my online courses, books and resources, too! Investing in your money management education is an investment in yourself. That’s the best investment you’ll ever make, I guarantee it!. Don’t forget my weekly Facebook live videos on Facebook.com/newcashview, Instagram @joyalfordbrand and on my YouTube channel NCVTV. You can catch me Thursday evenings between 8:00 p.m. and 9:00 p.m. (Eastern Standard time), for my weekly NCVTV episode. They are packed full of useful and entertaining money management information! If you’ve missed any NCVTV episodes, you can see the latest on newcashview.com or you can check out my YouTube channel and get caught up! You can get there by clicking here. Remember, like and share the NCVTV videos on Facebook and all your social media platforms, so others can benefit from them, too!
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