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Many people are concerned about their ability to pay their bills and creditors.
While making on-time payments might be challenging if you don’t have steady work, it’s important to understand how to protect your credit.
Protect Your Credit Score
The best way to keep a good credit score is to pay your bills on time. Just one late or missed payment can drop a credit score as much as 100 points. Making your payments on time protects credit for when you need it later.
Question: What can you do if you have too many bills and not enough money?
Make a Plan: Think about your income, cash flow, savings and other resources that might be available to you.
- How much money do you have coming in and when do you receive it? Both are important! (If you don’t already have a spending plan, use this one!)
- What community resources might you be eligible for? A coach may be able to help you find and determine your eligibility for resources!
- Sometimes there just isn’t enough money to cover everything. Make sure you are able to pay for groceries and essential medications or supplies.
- Determine what you CAN and MUST pay first.
Get in Touch: Contact your creditors before you fall behind, rather than after. Because of the pandemic, many lenders are offering more ways to work with people who are struggling with payments, such as deferment (A temporary pause to payments during a hardship. Interest may continue to build during the deferment.), forbearance (Payment is put on hold during an economic hardship. Interest continues to build. Payment of full amount may be required at end of forbearance.), or loan modifications (You may be able to change the terms of your loan to better meet your needs for repayment. This will likely require you to sign a new loan agreement.). These programs are sometimes called “hardship” or “relief programs.”
Mortgage or rent, auto loan and credit card payments are generally important to keep paid, if possible. However, there may be options if you are struggling to make payments as agreed:
- If your loan is federally owned (many are!) you may be able to put your loan into forbearance for up to 12 months. First, look up your loan here and here.
- If your loan is listed here, contact your loan servicer (the institution which sends you statements each month) and explain that you are experiencing financial hardship due to COVID-19.
- If your loan is not listed here, contact your loan servicer anyway and explain your situation. Many have options which may help you keep your home and protect your credit.
- Check x to see if you might be eligible for assistance paying your rent.
- Communicate proactively. Contact your landlord and try to work out a payment arrangement.
- If you are not able to pay your rent or are behind on your rent during the pandemic, you may be eligible for protection from eviction if you qualify and take certain steps (see here). This, however, does not mean that you do not owe the rent or that you will not eventually be evicted or have legal action taken against you. Nonpayment and/or eviction may limit your housing options in the future and/or lead to higher security deposits requirements. The law on this issue is evolving so check the news for updates.
Auto and Personal Loans
- Contact your lender immediately to explore options.
- During the pandemic, lenders have options that may not normally be available to borrowers who fall behind or are at risk of falling behind. These options may include Waiving late fees, Deferring payments or forbearance and Loan Restructuring
- Federal Student Loans: Many Federal Student Loans were automatically placed into administrative forbearance and no payments are due through September 30th, 2021. However, Perkins and FFEL Loans are not covered under this and payment remains due. If hardship assistance is needed, borrowers can contact the loan servicer to determine if any assistance is available.
- Private Student Loans: Contact your loan servicer directly for hardship assistance.
- If possible, pay at least the minimum balance on the credit card before or by the due date. Doing so will keep your account in good standing.
- If you are unable to make at least the minimum payment, contact the lender prior to the due date as they may be able to offer accommodations such as changing the due date, waiving fees, deferring payments, forbearance, or other options.