If you’re concerned about your credit during these trying times, you’re not alone. Many Americans are having trouble keeping themselves afloat these days. Thanks to the student loan forbearance and the federal mortgage deferrals, many Americans won’t have to worry too much. However, these periods are ending soon. Read out this blog on how to keep good credit when unemployed.
But what about your credit? Sure, you might be able to stop paying your mortgage and student loans temporarily, but what if you don’t have work right now? How do you keep your credit score high?
Tips For Keeping Good Credit When Unemployed
Don’t overextend yourself on your credit cards.
If you want to have good credit, you want to keep your utilization ratio low. This is because “Amounts Owed” is 30% of your credit score, and includes the total amount of debt you have as well as the percentage of debt to available credit. This percentage is called the utilization ratio.
To keep your credit score high, even during financially trying times, you want to do your best not to spend too much. Don’t run up your balances on your credit cards if at all possible! Instead, do your best to lower overall spending. Also, do your research on what kind of financial aid is available for you.
Make the minimum payments.
If you’re not making any money, the best thing you can do is to continue making payments. Ideally you want to make the largest payments possible, but your situation isn’t ideal. You still have other bills to pay, and they should take priority over your credit cards. However, you should NEVER skip a payment on any debt you owe! Payment history is 35% of your credit score, and any past due payment will hurt your score.
The best way to deal with this is to make the minimum payments. Yes, you will accrue interest, and it will cost you more. This is better than the alternative, which is to either not make payments on your credit card debt or to not make payments elsewhere.
Avoid taking on new debt if at all possible.
Similar to the overextending tip, you want to avoid taking on additional debt while you are unemployed. This means, don’t make a large purchase with debt if you can help it. Don’t open up new credit cards or lines of credit, unless you absolutely need them.
If you have to take on new debt, make sure it’s for a good reason. If taking on new debt will prevent you from falling into homelessness or destitution, then do it. Sometimes, taking a hit on your credit score is necessary for immediate survival.