How to Keep Your Credit in Good Standing During Difficult Times
Life is good. You've established a good credit history and consequently, have an excellent credit score. Several significant purchases have been made and even paid off that have all looked well to creditors. Then disaster hits! You or your significant other has lost their job, and at the moment all the financial burden rests with one person. The bills become a struggle for you to pay, and currently you’re unable to make those timely payments to creditors whom you’ve always made.
Realizing that this is only a temporary situation, there should be focus on maintaining your credit through these difficult times without completely destroying it.
It is easier to maintain credit than it is to repair bad credit. In this sense, you want to do everything that you can, to keep your score high as possible. Experts have said that a score between 300 and 584 represent a bad score, while a score above 670 represents a good score. More so, multiple benefits exist for holding a high score, including lower interest rates, which directly affects how much money you will have to pay back.
You Have to Start Somewhere
One of the most important keys to establishing and sustaining good credit was knowing
where to start and how to maintain to begin with. Educating yourself on proper money management can go a long way to keep you away from certain financial burdens. One of the biggest lessons is to save a little money on the side and establish a fund that could help you through a rainy day - or rainy months if you’ve lost your job. Furthermore, you should check your credit history about every six months and examine it for inaccurate information.
In addition, keeping a low balance is an excellent tactic to use as it’s easier to pay off, as well as it helps maintain good utilization rates. Utilization Rate is the amount of outstanding balances on all credit cards divided by the sum of each card's limit, and is used to help measure your credit score. While the goal would be to keep this rate low, keeping a lower balance also helps in the fact that you equally important have a lesser minimum payment.
Traditionally, it’s been good advice to pay more than the minimum balance to help pay down more on the principal of the amount that you’ve borrowed, but now that it’s become next to impossible, there is little choice. Paying the minimum balance, on time, will still keep you out of trouble with creditors and will at the same time reflect a payment made on time. There’s no argument that can be made that a $20 minimum payment is far more attractive than a $100 minimum at a time when you are just trying to survive.
Don't Fall For This Trap
Currently, there are an abundance of debt consolidation services that offer people an option to get out of debt. Consolidation may not be as attractive of an option as it appears on the surface. These loans will often carry higher interest rates, and they do not help to educate you or help you form good habits.
Taking measures such as securing these types of loans should be considered a last resort, as the point is to stay afloat temporarily without reaching this point. A better strategy would be to work directly with the lenders to develop a plan of action that will allow you to stay in good standing with them.
Ordinarily, you can set up a plan where you can pay a lower amount until you are able to catch up with your payments. Unbeknownst to many, there are some organizations that will provide you with a small grant to help you pay for utility bills such as an Electric Bill in the case of an emergency (being disconnected). Lastly, and this is my least recommended option, plan ahead and maybe miss the due date for a few days if it buys you some time to seek out additionally revenue streams.
The caveat to this is that you will incur a late-payment fee, but if you are still able to pay before 30 days, then it shouldn’t affect your credit score. This would be dangerous territory, so caution should be taken.
So, if the name of the game is survival until your income level normalizes, then it is quite possible to do it and come out unscathed. Careful planning and being aware of what to do and what not to do can save you and your credit score in the long run.
Note: I originally produced this article for a website that afterward I discovered was scamming Freelance Writer's out of their hard earned money. I decided to post it here instead of one of my other blogs, but the aim was to not allow this article to be sold through a dishonest person who takes advantage of writers. Do not use Ghostbloggers.net if you are a writer or a buyer.
