How to Guard Your Credit when Unemployed

Having good credit is important for a number of reasons. Your credit score can make it easier for you to qualify for loans or high-value rewards credit cards. Good credit also means that you’ll pay less interest when you get a loan, which can save you huge amounts when you make large purchases, such as a car or a home.

Maintaining your credit requires managing your bills and making your minimum payments every month. If you get laid off from your job, something that used to be easy can now be hard.

One of the first things that you should do is get a copy of your credit report. Knowing what your report looks like, what information appears on it, and what your credit score currently is can help you understand more about how credit works and how to protect yours.

There are lots of ways to get a copy of your credit report for free. Federal law requires that each credit bureau give consumers one free copy of their credit report each year. You can request a copy through annualcreditreport.com.

Getting a copy of your report also means you can look for errors in the report and notify the credit bureaus. You might be able to boost your credit score if you find accounts, addresses, and names that aren’t yours.

You can also use a free credit monitoring service like Wallethub, Freecreditreport, and Credit Karma, which let you see your score for free. If you want to see all 3 credit reports at once Identity IQ will monitor your credit and provide Identity theft protection. They will notify you of changes in your scores, inquiries to your credit, applications for new loans or new credit card accounts that appear on your report.. There is a charge of $28 but they can help you find out about fraud sooner rather than later and get false information removed from your report.

Credit Utilization is another important factor. If you put most of your spending on a credit card, this increases your credit utilization which can drop your score 10%-35%. If your unemployed, now is a good time to stop using your card. The smaller the balance that you add to your card, the better. Paying with cash can make it easier to not spend money that you don’t have.

If you expect to have trouble paying your credit card or loan bills, don’t wait to miss a payment. Reach out to your lenders and let them know what’s going on. They can help you defer a payment or work out a payment plan that may help you stay current. There is no guarantee your interest rate will not be affected but you won’t have a late  or missed payment on your credit report, which can hurt your score.

While not every lender will be willing to listen, many lenders will be willing to work with you. This is especially true during the coronavirus pandemic. Lenders understand that many borrowers are having trouble making their minimum payments and have set up programs to assist those borrowers where possible.

If you’re making more than the minimum payment of debts, such as your mortgage or auto loan, it can make sense to switch to making just the minimum payment while you’re unemployed. You’ll pay more interest and it will take longer to repay the loan, but it can help you stretch your savings and go longer without having to miss a payment on one of your bills.

Sometimes, there’s not much that you can do, especially if you’re unemployed for an extended period. Remember that your credit isn’t a permanent record. Things like missed or late payments do fall off of your report eventually and even people who declare bankruptcy can repair their credit with time and hard work.

While you should always do what you can to pay your monthly bills and maintain healthy credit, damaging your credit isn’t the worst thing that can happen to you. If you try, but you just can’t pay all your monthly bills, focus on keeping yourself healthy, and finding a new job. Once you’ve done that, you can begin taking steps to rebuild your damaged credit score.