We’re all taking precautionary measures to protect our physical health during these unprecedented times. But, what about measures taken to protect our financial health? It’s directly correlated to physical and mental health, making it an important part of staying healthy overall as we move through the economic landscape that’s to follow.
Last September, reports claimed that even a mild depression could cause major pain for those who owe credit card debt. This was mere months before the coronavirus ravaged the world and required economies to shut down nearly completely. Things are a bit different now, but the fact remains the same: making payments on your debt is difficult during a recession.
How can you protect your credit health during a recession and check your credit score to ensure you’re not seeing massive drops due to missed payments and major delinquencies? Here’s what to know.
Check Your Credit Score
It’s hard to protect your credit health if you don’t even know what your current credit score is. So, your first order of business is to access your annual credit report or sign up for a service that allows you to get a free credit score check. There are numerous apps that exist that allow you to do this, such as Mint, Credit Karma, or even Float.
You’re technically able to request a free copy of your credit report from each of three major credit reporting agencies once each year, but apps and platforms such as Float will allow you to see an updated credit score more often without any penalties. These kinds of financial planning apps are able to perform soft inquiries to help you monitor how you’re either improving or hurting your credit score through this recession.
Revise Your Monthly Budget
Chances are, you’ve been affected in some way by the crisis. Whether you’ve lost your job, have had your pay reduced, or are now able to put off student loan payments due to the freeze, your financial situation has likely changed. Now is the time to sit down and take a hard look at your monthly budget. Crunch numbers and figure out if you are able to move money around to avoid having to reduce your monthly credit payments.
This could include canceling certain subscription services to save money or allocating the money you’d usually spend on student loans to put towards paying off your credit card debt. Think about starting a side hustle as a way to earn extra cash and begin to put that money away now. Even if you’re not having trouble making payments at the moment, you might in the future and you’ll be thankful for that added cash.
Contact Your Credit Card Company
Numerous banks are offering relief during the coronavirus crisis for members who are unable to make payments. If you think you’re going to fall behind, give them a call or speak with a financial advisor who can help you figure out what your options are. Most major banks announced recently that they are offering coronavirus relief for credit cards. You simply have to contact them and explain your situation.
Most people aren’t aware of how many resources there are to help them avoid missing payments and potentially hurting their credit score. Consumers Credit Union, for example, is offering numerous COVID-19 resources and relief. However, nearly every other institution is also offering either relief or resources that can help you protect your credit health during this crisis and recession.
Don’t Close Your Accounts
During a financial crisis, some people tend to react by reducing all financial responsibilities. While that might seem to make sense, it’s actually not a good idea if you have credit cards as that open line of credit can actually help you increase your credit score and overall credit health. So, don’t close any of your credit cards or accounts at the moment.
Closing out accounts can affect your credit utilization rate and reduce your score in terms of the total credit amount you have open. If you’re really interested in closing out the account, it’s best to speak with a financial advisor in order to look at your options and assess how it will affect your credit score and what some other options might be.
Consider a 0% Balance Transfer Card
If you’re in good standing or have an average credit score or above, you might consider taking advantage of 0% balance transfer offers. Depending on which credit card provider you currently have, you can speak to them about their balance transfer credit cards and what your options might be. Regardless, you’ll only be dealing with one credit card payment each month. And it’s often a great way to reduce interest rates and receive better perks and rewards.
While the perks and rewards don’t really have much to do with your credit score or credit health overall, they can help you achieve savings goals with bonuses that you can turn around and put back towards your monthly payments.
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More articles about how to prepare for a recession:
💪How to Prepare for a Recession?
5 Actionable Steps for How to Pay Off Debt During a Recession
Are 401K Investments Safe in a Recession?
