If Covid-19 has caused you a loss of income, you’re facing questions: What can I do if I can’t afford all my bills? How will this affect my credit score going forward?
The first thing you need to do is develop a new budget. Any time income or expenses change, a new budget (spending plan) is needed. This plan can save time and reduce stress because it helps you look at your financial picture for the whole month all at once, rather than just dealing with each expense as it comes along. Having a well-thought-out plan can make the difference between falling behind on bills and being able to make your payments on time.
A good next step is to contact your lenders — the holders of any loans or credit cards you may have. Ask if you are eligible for any type of assistance. Many financial institutions/creditors are willing to work with consumers due to the current pandemic. You may be able to work out a modified repayment schedule with payment amounts that fit your reduced budget.
There are various ways that creditors or lenders can help consumers. They may waive late fees, offer payment modification, or even make a new short-term loan. Payment modification may be via reduced payments, interest-only payments, or possibly forbearance (which means making no payments for a period). Remember, accounts in forbearance may be reported to credit bureaus as late or missed payments.
Finally, it is important to review your credit report. You can obtain a free copy from www.annualcreditreport.com. Normally credit reports are available free once a year, but due to COVID, they are available weekly until. Checking your credit report allows you to correct any errors your find, which may boost your score, and certainly ensures your credit is reported accurately and reduces fraud risk. Those corrections may also help with job searches, rental inquires and lower interest rates.
You may also choose to add a consumer statement to your credit reports. Although it will probably not boost your score, it offers you a chance to explain why you were having difficulty paying bills on time like normal. This explanation could make a difference to future employers or lenders that review your credit report. This statement should be brief (100-200 characters).
Today’s guest blogger is Casey Codner, Extension Human Sciences Specialist in Family Finance serving east central Iowa