Credit Repair | Loss of Job

If you experience a sudden loss of income it is important to be aware that you can Minimize the Impact and Protect Your Credit Score 

The Affects of Job Loss on Your Credit Score

and how to handle credit and bill payment while you are in between jobs.

  • Examining your finances to determine your monthly expenses
  • What is the basic amount of survival money you need to meet your monthly payment obligations? Look for hidden expenses, which may be eliminated for the time being, and make conscious decisions what to cut.
  • Think about all of your available lines of credit, such as the equity you have in your home and your savings. Be strategic not only in your finances but in your search for a job as well. 
  • Your 5 priorities should be rent/mortgage, utility bills, food, insurance, and medicine. These are the bills that have top priority.
  • Call your creditors and explaining your financial situation; creditors are more likely to be reasonable discussing payment options than if you wait until you have missed a payment.
  • Once you have determined your monthly budget, make a decision on what you have left over to spend on discretionary expenses. Divide that number into the total monthly amount to determine your weekly cash flow.
  • Don't close your accounts and cut up your credit cards, but use them sparingly. Unemployment will compromise your ability to get a line of credit..
  • Create a job search plan of action. Look for networking opportunities everywhere. Keep your focus on the things you can control, and stay positive and upbeat. Your new job is finding a NEW job and keeping any debt, you may have, out of the hands of collection agencies.
Protect your Credit Score
Take steps to protect your credit score while unemployed and it will make your financial recovery process easier if you suffer a setback.
  • Keep track of your credit score and know what it is. You are entitled by law to one free credit report per year if you get them through AnnualCreditReport.com.
  • According to the Fair Credit Reporting Act* you are also entitled to a free credit report if you are unemployed and searching for work. 
  • It is not uncommon for a future employer to run a credit check on you, (another reason why you should take charge of knowing what is on your yearly report).
  • If there is an error in your credit report you may ask to have it corrected, but this is a process that takes place via mail, and will not be an immediate fix.  If there is a problem be sure to take the time to resolve the discrepancy.
  • Without a regular paycheck coming into your household, the use of cash for discretionary expenses is the suggested way to make purchases, and be mindful of how you are spending your money. An important benefit of using "cash only" is that if an emergency were to arise you would have credit available.
  • Focus on making the minimum payments on your bills, and make sure the payment is received on time. Maintain your cash reserves until you get your new job and then resume your goal of paying off your credit card balances.
  • Defer Debts when possible. Call your lender and inquire about an "economic hardship" deferment. Student loan payments can be deferred if you have been unemployed for at least 30 days, allowing you to postpone your payments and for interest not to accrue during your unemployment. Deferred debt does not impact your credit score because deferred debt is not reported to the Credit Bureaus as late or missed payments.

*Fair Credit Reporting Act: The Fair Credit Reporting Act was enacted to govern how credit bureaus maintain, share and correct information in credit reports. It sets out, for example, a method by which consumers can force inaccurate information to be removed from credit files. A 2003 amendment to the act granted consumers the right to get a free copy of their credit reports yearly from each of the three major credit bureaus.
  

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