There’s no telling when we might face an economic crisis such as the one posed by the COVID-19 pandemic, but the principles remain the same. Even during an economic crisis, it’s important to take care of your credit score, as they’re calculated based on payment history. What you do during an economic downturn will affect your credit score for several years to come. After all, lenders want to deal only with borrowers who are low-risk and are reliable when it comes to paying dues.
It’s also understandable that there may be times when your finances may not be able to sustain payment of your dues, but there are also ways to mitigate the negative impact on your credit score. Protecting your credit score is really just a matter of ensuring that that minimum debt payment is settled, but what should you do when you’re unable to do so?
Inform Your Lender Ahead of Time
It’s of utmost importance that you’re able to inform your lenders ahead of time (before you miss your payment.) Most lenders adjust their policies in order to accommodate borrowers who may need more time to pay their bills. Some lenders also lower their interest rates and payment amounts for a period. Others even allow payments to be deferred, wherein they do not report late payments to credit bureaus. Before these options can be made available to you, you have to inform your lenders as soon as possible.
Monitor Your Credit Reports
Crime rates tend to spike during economic downturns, and this includes credit fraud. Besides protecting your identity, it’s also important to monitor your credit reports regularly so that you’re able to determine normal activity from fraudulent activity. This allows you to identify any fraudulent activity and to respond to it before it can damage your credit score.
Dispute Any Discrepancies On Your Account
Any discrepancy on your account including a misspelled name, wrong address, or any of the sort needs to be correct as soon as possible. The reason for this is because identity thieves might have opened a new credit account under your name without any intention to pay the bills. Sometimes, credit bureaus also make errors in credit reports. A timely payment may be misreported as a late payment or you could have an open collections account even when you’ve already it off. These errors hurt your credit score, and consequently, correcting these errors will also improve your credit score.
Seek Professional Help
If needed, you might want to work with a financial advisor to help you manage your existing debts. You can never go wrong with asking for professional help. You can even consider purchasing au tradelines (authorized user tradelines) as a means to quickly improve your credit score as long as you’re able to find a trustworthy credit partner.
An economic downturn should never be a reason to neglect your credit score. Recessions are temporary situations that eventually improve. A poor credit score could impact your reputation in the finance world for many more years and this will adversely affect your ability to secure financial assistance from lenders.