As you might imagine, my phone has been ringing off the hook with clients, friends, and students asking me all about what will happen to their credit if they are missing payments due to the partial government shutdown. So I thought I’d address what’s happening and give you a step-by-step plan to protect your credit, if you are in this situation. If you’re being affected by the shutdown, you’ve got some work to do to protect your financial security and your credit score. Here’s my step-by-step plan.
First of all, don’t panic if you just missed your first set of payments. Remember that a late payment does not report on your credit until the 30th day from your due date. So, you have 30 days before you get reported late from the due date, which may help ease your mind a bit.
But there’s still work to be done:
Step 1 – Pull your credit report
I want you to pull the latest report because I want you to make sure you have a current list of all your creditors. Sometimes, especially after the holidays, we can forget that we got a store card for the discount or have a card that you hardly ever use. Request the report directly from the three major credit bureaus: Experian, TransUnion, and Equifax. You can also go online to www.annualcreditreport.com to get all three reports for free.
Step 2 – Get organized
It is very important to be organized during this time so nothing falls through the cracks. I recommend you have a separate file for each credit bureau and a notepad or notebook to take notes. Also, examine your credit reports for any errors. Make sure your employment is listed as employer of federal government.
Step 3 – Call your creditors
Next, you are going to call each and every one of your creditors that you owe a balance to let them know about your situation and that you are not able to make your payment – if that’s the case. You need to take good notes during these conversations that include who you spoke to, their ID number, the division you spoke to, and the number you called. Ask them what they are willing to do during this time and how it will affect your credit score.
Yes, many creditors and banks are waiving late fees and attempting to help, but I want you to make sure to ask about whether they will report you late. Make sure to talk to them about this question. Do not assume they know what you’re experiencing. You have to call your creditors to discuss your situation and ask for the help. Remember, one late payment will drop your score 75 points and several late payments obviously can do more damage, so this is important stuff to keep in mind.
Step 4 – If you have an emergency fund, use it
I’ve received numerous inquiries asking the question, “if I have the cash to keep up with my payments, should I do it?” By all means, yes, if you can and if you feel safe in doing so. If your creditors report late payments, that will make for bigger problems with your credit. It will be much easier to pay yourself back then it would be to catch everything up with your creditors. If you do have savings to use.
Step 5 – Keep on top of it all
If you’re not working during the shutdown, welcome to your new job…keeping up with your finances and creditors. Yes, this could take some time, but believe me, it will pay you back in the long run. Keep in touch with your creditors and follow up regularly in case they change their policies or programs related to this crisis. They may add or eliminate options for you, so keep an eye on each one of them.
I cannot understate that it really is important to be organized because this is your credit, as you know, and it’s a very big part of your financial life. You want to make sure you can keep it healthy during this time if you are affected. So, stay organized and keep educating yourself. I’m here to help so please stay in touch with me on social media as I will be providing up to the minute updates there.