The ongoing pandemic has negatively affected millions of Americans. By June last year, over 40 million Americans became jobless and sunk into debt. Consequences? The pandemic’s financial victims suffered a poor credit score.
Fortunately, you can weather the economic storm and recession-proof your credit score. Reputable credit repair experts like the Credit Coachesrecommend following sound financial counsel to help you retain a good credit score. Here are the top five ways to avoid a negative credit standing.
Adjust Your Spending Habits
Poor spending habits cause many low credit scores. During a recession, it’s prudent to tighten your expenditure by eliminating all unnecessary spending and sticking to the essentials. You have to spend and live within your current financial ability to avoid the credit card debt trap. If you must pay using credit cards, use them to a level you can repay within a month. Eventually, streamlined and objective spending will keep you off the debt trap that dents your credit standing.
Create a Budget
As simple as it might sound, some people’s poor credit score stems from a budget-less life. You should determine your income against essential expenses like rent, food, and mortgage. This way, you will be better placed to create a budget that won’t overburden your finances. Also, monitoring your expenses for a few months enables you to know where your money has been going and how to respond appropriately.
Create an Emergency Fund
It’s still prudent to create an emergency kit even if you are still employed, or the pandemic didn’t sink your business. Credit score experts like the Credit Coaches recommend this approach because recessions can make jobs and income uncertain. For example, your business could start making losses for some months, or you could lose your job. Also, you might end up with an inconveniencing salary cut.
Therefore, create a fund to take care of your basic needs and that of your family for at least six months. This way, you won’t slide into avoidable debts to meet essential needs.
It’s also prudent to save your money in a dedicated interest-earning account to avoid the temptation of wanting to withdraw from it. Moreover, set up an automated transfer from your checking account to ease your savings.
Contact Your Lenders
It’s also beneficial to contact your lenders to ensure you don’t miss or delay paying your due debts. Communicate early to inform them if you will delay repayments plus the reasons. Many lenders are humane enough to understand their customers during a recession and offer them customized options. Some of them include lower interest rates and adjusted repayment schedules. Consequently, your lenders won’t flag you as a defaulter and lower your credit score.
Pay Your Debts
Lastly, pay your debts as much as possible. Start by prioritizing your debts and clearing those with the highest interest rates first, for instance, credit card debts. This way, your credit utilization ratio will reduce, increasing your credit score. Also, you will have some extra cash to help you bolster your budget along the way.
These five hacks should help you improve your credit score during this recession. It’s up to you to integrate them into your life and enjoy financial freedom.
Sudarsan Chakraborty is a professional Blogger and blog writer. He lives and breathes in the blogging industry. He regularly writes on Widetopics to keep all the readers updated with the latest facts on wide range of topics.