Your credit score is one of the most important facets of your financial identity. It determines interest rates on vital loans, whether you get these loans at all and decides whether you’ll get a credit card. Keeping it a reasonably healthy level is crucial to your financial standing, which is vital now more than ever.
However, the coronavirus pandemic has inevitably affected the way people handle and maintain their credit scores. Learn how this unprecedented health crisis has affected credit scores as well as what you can do to stay on top of your finances.
Joblessness and the Pandemic
The primary way the pandemic has affected credit scores is by taking away jobs. Credit ratings and scores depend on your ability to pay existing debt and leverage your income to get new ones. Without a steady source of income, maintaining a healthy credit score is going to be difficult.
The coronavirus pandemic has caused the highest job losses in the United States since the 1930s, when the Great Depression caused the economy to spiral out of control. As of September 2020, half a year since the outbreak began, almost half of Americans are still out of a job.
The virus has disproportionately affected several industries, leading to millions of job losses. Chief among these sectors are the following.
- Restaurants have largely been shuttered due to the risk of removing masks in confined spaces. Take out places haven been encouraged leading to a surge of profitable Subway franchises, successful drive-throughs and similar establishments.
- Airlines have had to operate at increasingly reduced capacities due to lockdown restrictions and a global reluctance to travel for fear of spreading or catching the virus.
- Entertainment especially places such as movie theaters and stadiums have been closed for months to avoid congregating a lot of people in a single area. Such gatherings increase the risk of contagion.
Maintaining Your Credit Score
Because of all these job losses, people are looking for effective ways to manage their credit and finances. Although you could work with advanced credit risk analysis and management specialists to find a solution, there are several simple ways you can handle your finances for the time being.
Pay Rent First
Aside from affecting your credit score, you should prioritize debt that can have immediate and severe effects if unpaid, such as rent. Experts say that between 30 to 40 million Americans are at risk of being evicted during the pandemic. Although several states have made contingencies to prevent this from occurring, you should pay your rent first if you have available income.
2. Don’t Drop the Ball on Utilities
Similar to how rent can lead you to become homeless during a pandemic, not paying your utility bills can leave you without power, water or heat during one of the worst winters in American history. Stay on top of your utility bills and arrange them in order of importance. Power and water bills are should be your top priority. If you manage to score a job where you work from home or telecommute, your internet or data plan is also a priority.
3. Keep Your Car
Mobility is key during the pandemic, especially given the heightened risk of going on public transportation. If you have a car but have not yet finished paying it off or are leasing it, maintain the payment plan if possible. Not only will defaulting on your car loans be bad for your credit score, but it can also deprive you of a means of making a living or driving to job interviews. Your car is a vital investment you shouldn’t let go.
4. Find a Part-Time Gig
If you lost your job because of the pandemic, it’s essential for your credit rating and survival to secure a new source of income as soon as possible. Without any sources of income to report to, you’ll have an impossible time securing good loans in case of an emergency.
Full-time jobs are hard to come by these days so you should look to the gig economy. If you manage to keep your car, you can try joining a courier service or food delivery. If you have a stable internet connection, try finding freelance gigs for your marketable skills such as editing or writing. The sooner you can establish a new source of income, the better.
5. Talk to Creditors
Finally, reach out to your creditors. Millions of Americans are going through exactly what you’re going through. Given the new realities of the pandemic, you might find it possible to renegotiate the terms of your lawns. If possible, try to have large loans such as mortgages restructured to better reflect your ability to pay them off. Some companies will be willing to accommodate this because they’re not keen on having too many clients default on their loans. So talk to banks and creditors and see how you can finagle your finances.
The pandemic has invariably affected everyday life in the United States. And although your credit score is an important part of that life, you should focus on the essentials. Keeping a roof over your head and staying warm is more important than a few numbers. So think sensibly and spend wisely if you want to make it through 2020 intact.