The Situation in the US
The number of confirmed coronavirus cases worldwide is about 2 million with 614,180 cases in the United States alone. More than the fear that comes with seeing more people dying daily than ever before are the new social distancing and quarantine regulations. While working for home is normal for some people especially those in the tech industry, millions of people across the globe are out of their jobs and the number in the United States is between 6-10 million people. These individuals, mostly small business owners in the service industry have filed claims for unemployment benefits to help them during these tough times. It is only normal to get worried about how the pandemic will affect your credit score especially if you have been maintaining a good credit score before the outbreak.
There are two questions that most people are asking at this time. Does my income affect my credit score? Is there anything I can do now to stop me from running into huge debts? First, your income does not have a direct impact on your credit score, but it does play a role when lending institutions want to determine your ability to pay back a loan. Second, there are important steps to take in this period of uncertainty to avoid a drop in your credit score. You will learn more about that as you read on.
Credit Score in the COVID-19 pandemic
It is important now more than ever to know what is going on with your credit. Reports show that credit bureaus are receiving more queries than other databases and now at the height of the pandemic, you may have to be more careful than ever for scammers. The Fair Credit Reporting Act, the Federal law guiding accurate credit reporting obliges the three credit bureaus in the United States to provide credit annual credit reports to consumers. You can download your credit report from Experian, TransUnion, and Equifax at AnnualCreditReport.com. If you find any incorrect information on your credit card report, it might be a sign that your account has been used by unauthorized persons, but that is not enough to conclude. Reach out to us at Iconiccreditservices.com for help with correcting errors in your credit scores. During this pandemic, make sure to check your credit report from all three bureaus monthly. You will find out in your credit report that your income or employment is not considered in calculating your FICO® or VantageScore. The problem, however, is that keeping up your normal monthly or weekly budget will become more difficult during this time. A single mom said that she now struggles to buy as much as she used to because of changing prices of items and the extra expenses she has to incur to make her kids, who are now at home, comfortable. It will do you no good at this point if you still don’t know how your credit score is calculated. Read credit scores explained to get a better idea about what institutions consider in calculating your credit score. As a Medscape study suggest that Americans may need to stay at home much longer to flatten the curve of the coronavirus spread, it is important to take charge of your credit situation today.
What You Can Do
With rising uncertainties of the COVID-19 pandemic, there are a few things you can do to maintain a good credit rating. These steps will also improve your life positively during these times because you will make the best of the resources at your disposal when you follow these steps.
1. Make Minimum Monthly Payments
The most important factor in your FICO® and VantageScore is your payment history. Lenders use this to determine whether you have been keeping up credit payments. As long as you make a minimum payment on your credit cards, you will be always on time. If you are in a tight situation financially, which is likely at this time, make sure to pay a monthly percentage of balance and interest on your credit card. If things get worse, contact your credit provider or send us a message at Iconicreditservices.
2. Contact Your Lending Institution
In response to the harsh conditions caused by the pandemic, the US government introduced the Coronavirus Aid, Relief and Economic Security Act (CARES) on January 24th, 2020. The act mandates lenders to report a current loan status on the account of customers who have contacted lenders for relief as a result of the pandemic. Most banks in the United States are offering coronavirus relief to Americans. See the list of banks in the US offering COVID-19 aid. Always keep in touch with your lender and let them know if you need help or are unable to settle your debts on time as a result of the current situation.
3. Apply for Unemployment Benefits
CARES Act provides a coronavirus stimulus package that includes an expanded unemployment benefit of $600 per week from the state government. The benefits extend to freelancers and self-employed workers who are not normally considered in government relief packages. Given the number of people and pressure on the system, it will take up to a month in some cases before your first unemployment benefit arrives. File your unemployment request earlier to avoid getting stuck in a critical situation.
4. Cut Down Your Budget
The last thing you want to do this period is spending your money like you used to. That will prove catastrophic, to say the least. You should sit now and calculate your income including stimulus so that you will have a good idea of how much you can spend at any given time. Cancel all unnecessary subscriptions and recurring payments for services. Spend more on the necessities of life such as healthy foods and simple clothing, if you must get some. Sticking with such shrewd measures is not by any means easy. If you do this, however, you will be better able to get off the ground financially and face future uncertainties with ease.
5. Learn a Skill and Get a Job
While millions of people were going out of their jobs, Amazon saw a rise in sales. There are companies for whom this time is the best time ever as they have more jobs and are hiring more employees. Most of these companies do not require the physical presence of their employees to keep the job going, which effectively adheres to social distancing rules. Here is a useful link of 25 fully remote companies that let their employees work from home. You will learn new skills from the comfort of your home by taking one of Udacity’s free nanodegree program available for one month.
As the world continues to grapple with the COVID-19 pandemic, making a conscious effort to maintain good credit scores will save you from stress and uncertainty. Credit bureaus may not use your income to calculate your credit score, but it does have a part to play in your ability to remain creditworthy, and capable. Coronavirus is sure going to leave many struggling with poor credit rating. You can avoid being a victim by following the recommendations in this article.