As we all know, if you fail to make payments on loans, your credit score will be affected negatively. What can you do to protect it?

The latest stimulus package passed into law almost had a provision in the law that would not allow credit bureaus to report non-payment of bills for 4 months. That would have gone a long way in helping to stave off the ill effects. In the absence of this amendment, some banks and credit card companies have all expressed their willingness to work with consumers hard hit by job loss due to the global pandemic.

If You’ve Lost Your Job

Contact your creditors. Many credit card companies are willing to allow you to delay payments if your ability to pay has been affected by the pandemic. However, this delay in payment is not automatic. The same applies to mortgage companies – many have signaled their willingness to work with the public and potentially delay your mortgage payments for up to 12 months. The payments would be added to the end of the loan so you would still need to make them. The same with interest on credit cards, it will still accumulate while you are delaying or missing payments.

Make the minimum payment on your credit cards. While you should always strive to make the full payment amount on your credit cards, making the minimum payment will guarantee that you will not get a bad mark on your credit report. In addition, you will be avoiding racking up the maximum interest on your credit cards.

If you’re receiving a stimulus check from the government, resist the temptation to purchase something that’s been on your wish list and instead concentrate on paying existing bills.

If You’re in a Deferred Payment or Forbearance Plan

Lenders must notify the bureaus if a customer has been placed in a special program. The notifications ensure that these programs will not hurt a consumer’s credit report. Both FICO and VantageScore, the companies behind the credit scores used in lending decisions, have publicly stated that people in forbearance or deferred payments plans will not see their credit scores suffer.

Pull your credit report from annualcreditreports.com. Make sure that no black marks are being reported on your credit score. If you’ve already used up your one free credit report for the year, you can join free credit score monitoring services such as Mint.com and CreditKarma.com. Make sure your credit scores are not being affected by your deferment or forbearance programs.

Make sure you are not being charged a late fee. Credit card companies charge up to $39 dollars if you are late on a payment. People in forbearance of deferment programs should not be charged fees for missing payments.

If You Must Dip into Savings

Make a budget.  Those savings were built up carefully, so make sure that they last as long as possible.  Getting into a habit of having a budget now will help you to build up those savings once you get back on your feet with a new job or increased income.  

You can take up to $100,000 from your retirement accounts without penalty.  As part of the new stimulus bill, the 10% penalty normally assessed when you take money out of your 401K or IRA accounts is now waived.  Be careful doing this though as the markets are down now, you may have to withdraw more money than you would have to make your expenses, missing out on the opportunity for stocks to go up.