In the recent unsteady financial climate, losing your job is worse than ever. However, a new report issued this month outlines how to minimize the amount of damage that unemployed status can do to your credit history.
When your sole focus becomes searching for jobs, attending interviews and reworking your resume, it can be easy to forget about looking after your credit rating.
However, by making a little effort and protecting your credit rating when unemployed, you can improve your chances of getting a job and once you have a regular income again it will be easier to get yourself back on track.
The report offered seven tips to protect your credit rating if you are unemployed or feel that your job is no longer secure.
- Consider Payment Protection: This is a type of insurance which for a small monthly fee will put your payments on hold in the event of a job loss and is offered on credit cards, loans and mortgages.
- Request A Credit Report: Even before sending out your resume, you should order copies of your credit report from the three major credit bureaus. This will allow you to find any issues and errors and work on fixing them.
- Stick To Cash: You may be tempted to charge a new ‘interview outfit’ or a few extra groceries and pay them off later. However, it is better to stick to cash and leave credit for real emergencies.
- Meet The Minimum: If you do not have a regular income, do not worry about paying down credit card balances just yet. Focus on meeting the minimum payments on time and keep cash reserves. Even a single late payment can reduce your credit score by 100 points.
- Communicate With Creditors: If you struggle to meet your payments do not ignore them. Contact your creditors and explain. They will be more inclined to work with you to st up a repayment plan if you are upfront about it.
- Defer Debts: Debts such as student loans are easily deferred during unemployment. You can request an “economic hardship” deferment allowing payments to be postponed. Deferment has no negative effect on credit scores as it is not reported as missed or late.
- Stop Applying For Credit: When unemployed it can be tempting to apply for a new line of credit for emergencies. However the chance of approval is low when you are unemployed and multiple applications are detrimental to your credit score.