Begin by looking at your monthly budget. If you aren't sure where to start, use this guide to decide which bills to pay first. Your priorities should be food and housing first, then transportation and utilities. Unsecured debt is the lowest priority.
“Late pays stay with you for years,” Clark cautions. “But using too much available credit heals very quickly as your financial situation improves and you can pay down balances.”
How to Maintain a Healthy Credit Score During a Crisis
Your payment history and amount owed are the key factors that account for around two-thirds of your credit score. If you can continue paying bills on time each month, you'll be protecting 35% of that score. Another 30% comes from the amount of available credit you're using.
- Look at Your Budget and Prioritize Your Bills
- Make a Plan and Stick to It
- Make Minimum Payments on Time
- Contact Your Lenders Early
- Consider a Balance Transfer
- Check Your Credit Report Regularly
- Consider Credit Counseling
1. Look at Your Budget and Prioritize Your Bills
<span style="font-weight: 400;">"Basically, you have to decide what you save and what you don't," says <a href="https://clark.com/about-clark/clark-howards-bio/">money expert Clark Howard</a>. "With your bills, you're going to have to make very tough decisions.</span>
Once you've determined what your essential payments are, begin eliminating or reducing expenses in other categories. Here are a few examples of easy ways to cut down on monthly spending:
- Cancel any recurring subscriptions or memberships that aren't absolutely essential
- Switch to a cheaper service provider to reduce your monthly bills
- Take advantage of coupons, rebates and discounts for groceries and other essential shopping
2. Make a Plan and Stick to It
If you're new to following a strict budget, you can use the CLARK Method to create one now. Following a budget and keeping track of your spending are two great ways to avoid overspending and stick to your plan. You can also budget with a cash envelope system to keep yourself on track.
3. Make Minimum Payments on Time
Your minimum payments should be a top priority during a time of financial hardship. Making payments on time will have a lasting impact on your credit score, and it will put you in a great place to begin raising it again after the crisis.
4. Contact Your Lenders Early
<span style="font-weight: 400;">"As someone fights against more bills than available money, the first priority is to continue to be listed as current with your creditors," says Clark. "You either need to be able to pay at least minimums on time or negotiate a new payment plan with a creditor."</span>
Take the time and make that phone call so that your lenders are aware of the situation you're facing and understand that you're making an effort to stay current. You may be able to agree on a new due date, minimum amount or another arrangement to ensure you don't fall behind in the eyes of the credit bureaus.
If you're able to come to an agreement with your lenders, be sure to verify that it includes being reported as on-time to the credit bureaus. Clark recommends that you get a copy of this negotiation in writing (whether it's an email or chat record) just in case you're still reported as delinquent by the creditors.
5. Consider a Balance Transfer
To get started, you'll need to know your current balances and interest rates. From there, you'll need to look for cards that offer favorable terms for a balance transfer. Once you've read the details, applied for the card and transferred your balance, just be sure to pay off the debt as soon as possible.
For more details on each of these steps, check out our guide on how to pay off debt with a credit card balance transfer.
6. Check Your Credit Report Regularly
Once a year, you're able to get a free credit report from Experian, Equifax and TransUnion. The onset of a financial crisis is a great time to check that report to see where you stand and learn where you can make improvements. Be sure to also check for any mistakes. If you find any, be sure to address them as soon as possible so that they don't weigh down on your score.
To get started, choose one of these five ways to get your free credit score. You can also use a tool like Credit Karma to help you keep track of both positive and negative changes to your score as you navigate troubled waters.
7. Consider Credit Counseling
To get in touch with an expert, search for credit counselors in your area. For general questions, feel free to reach out to our volunteers in the Consumer Action Center.
Final Thoughts
How do you maintain a healthy credit score? Let us know in the comments below!
More Related Clark.com Content That May Be Useful:
- How to Decide Which Bills to Pay First When You Have Limited Money
- What to Do if You've Been Laid Off
- 5 Sneaky Ways to Improve Your Credit Score
[ This article was originally published on Clark.com ]
The post 7 Ways to Keep Your Credit Score Healthy During a Crisis appeared first on Clark Howard.