Sometimes, life takes an unexpected turn. At some point in nearly every American’s life, they will lose a job due to either being terminated, laid off, or a business shutdown. So, how to protect credit when unemployed?
It’s a difficult event to go through and it’s not an easy conversation to have with your bosses and your family. What’s worse is that it can be financially scary, especially if you don’t have a lot of savings to begin with. Protect credit rating during unemployment is one top things to do.
A common worry that many people have is that their credit will take a hit due to being unemployed. During periods of unemployment, you may need to borrow money to pay for living expenses with the agreement that you’ll pay it back when you get back on your feet. If you’re unable to pay, your credit will take a hit. One should know how to use credit while unemployed?
So how to protect credit when unemployed? The Credit Pros has some tips that can help.
Cut Unnecessary Spending
You have developed spending habits while you were employed that you simply can’t maintain while unemployed. You should know the impact of bad credit.
Common expenses that can be cut:
- Cable television. Your kids can watch Netflix or Hulu instead, and there are Internet service providers that do not require a cable package.
- Unnecessary subscriptions. Purchases like subscription boxes, music subscriptions, magazines, content subscriptions, these can easily be managed when employed but become a huge burden when unemployed. Keep reading how to protect credit when unemployed.
- Eating out and some entertainment. Just because you’re unemployed doesn’t mean you should never have fun, but you won’t need to eat out nearly as much while unemployed. Cooking your food will save you immense amounts of money.
You want to cut unnecessary payments to make payment and expense management much easier. One best way how to use credit while unemployed.
Managing Your Payments
If you had a job, you may have been in the habit of paying your credit cards in full. You may no longer be able to do that anymore. There are unexpected times your credit score matters.
It is much better to pay your balance as much as possible rather than pay the minimum payment. But it is much better to make a minimum payment than to miss a payment.
Make a calendar and mark each of your payment due dates, with the minimum payment required.
If you cannot afford to make the minimum payment on a credit card or loan, it’s time to move onto the next step. Keep reading how to protect credit when unemployed.
Negotiating Payments with Lenders
If you find yourself unable to make your payments, many lenders are willing to work with you. Since the alternative is getting no payments, and then potentially sending the debt to collections and getting a fraction of what they’re owed, lenders are happy to negotiate lower payments for longer payment periods, or potential deferments of payments with a one-time good faith payment. There are some pretty cool stats on credit scores.
Don’t be afraid to call a lender and explain your situation. This also includes your landlord, if you rent. Most landlords are receptive to situations and are unlikely to evict due to the potential costs and risks of taking on a new tenant. Keep reading how to protect credit rating during unemployment.
Generate Extra Income
If you’re unemployed, you now have a lot more time on your hands and not all of that time can be devoted to looking for another job. You can only send out so many resumes a day.
But, unemployment benefits don’t kick in immediately. And, if you plan to live off of savings, your savings will eventually dry up.
You don’t need to replace your old job income immediately. Every dollar helps. Read out 5 ways to save more money shopping on Amazon.
Ways you can generate extra income:
- Freelancing. Using platforms like Upwork and Fiverr can help you find people who need your skills and are willing to pay you on a contract basis.
- Rideshare and delivery apps. Apps like Uber, Lyft, Skip the Dishes, Grubhub, and Uber Eats have found to be an excellent source of additional income for people who are currently unemployed.
- Side businesses. Lots of things can be side businesses, and many side businesses do not require a very large initial investment. Taking a craft hobby and selling the crafts on Etsy is one way. Another is teaching people who want to get into your hobby. Blogging and generating income through ad revenue and affiliate links can be another side business. There are lots of ideas for starting side businesses, some of which can turn into real businesses that more than replace job income.
Using any extra income to help pay back debts will protect your credit from large drops due to missed payments.