With the global economic downturn and health concerns brought by the COVID-19 pandemic, it’s typical for business owners and consumers to worry about their finances. The financial markets are still unstable, causing the shutdown of many businesses and the unemployment of millions of workers.
Though physical and mental well-being is at the top of your priorities during this crisis, your financial health is also essential. Whether you’re a business owner or a consumer, you might be worrying about how to keep up with paying your bills while managing other essential expenses.
Staying on top of your finances while experiencing low income or shutdown due to the pandemic can be challenging. Fortunately, there are ways to do that without putting your business or personal financial health at risk. Read on to discover how you can secure your finances by protecting your credit rating amidst COVID-19.
The Importance of Credit Rating on Financial Health
Credit plays a significant role in your financial endeavor from buying a house or renting an apartment to applying for a job and acquiring certain services. The way you use your credit is tracked, and it can affect your ability to access funds when you need one. If your credit rating is high, you have better chances to get better deals, such as loans at a low-interest rate.
Borrowing money or taking out a loan may not have yet crossed your mind, but there might be instances in the future when you’ll be needing one to cover unexpected expenses. It wouldn’t hurt to be mindful of your credit rating or score, so you won’t have to deal with unnecessary problems later on.
Ways To Protect Your Credit Rating
Having access to additional funds during difficult times, such as the COVID-19 pandemic is essential, especially if you’re a business owner. Most businesses are vulnerable to economic changes, and it can be challenging to manage cash flow. Thus, it’s vital to have a strong credit rating or score to help you get competitive loan rates and terms.
While it’s easy to take your credit rating for granted during this unprecedented time, protecting it can help you keep your finances in order. Here are some ways to secure your credit rating amidst the financial crisis caused by the pandemic.
Pay What You Can
Your payment history is the most vital component of your credit rating or score. That’s why it’s crucial to be diligent in paying your bills on time. Ideally, you should be paying the full amount of what you owe each month, especially if you’re using a credit card.
But given the pandemic, where you possibly closed your business, reduced your income, or lost your job, paying what you can already make a big difference. Though late and partial payments can still negatively affect your credit rating, it’s way better than having no payment at all.
Reach Out To Your Lenders and Creditors
If you have existing financing during this pandemic and you’re struggling to make any payment, it’s essential to reach out to your lenders and creditors. Several lenders are extending flexible payment terms or payment deferrals for small businesses and consumers.
Don’t hesitate to call your creditors and check for any available assistance. Many of them are eager to work with people who cannot make their payments due to a financial crisis. They might have forbearance programs that will permit you to stop making payments or lessen your monthly payment for up to 1 year.
With loan modifications, you and the creditor can agree to make changes to the loan’s payment structure to help you keep up with the monthly repayment. The key is to ask your lenders or creditors for such assistance.
Check Your Credit Report
Another way to protect your credit rating is to get hold of the information written in your credit report. You can file a request from Experian, Equifax, and TransUnion, the three major credit reporting agencies in the US, to give you a copy of it.
For your reference, a credit report is a summary of how you have managed your credit accounts. It is where potential lenders and creditors get an idea of how risky you are as a borrower. Your credit report’s financial data were submitted by lenders, credit card companies, and other financial companies where you were able to use a credit.
Therefore, it’s essential to check your credit information to ensure that the details are complete and accurate. If you find any discrepancy or inaccuracy, you must correct it before it damages your credit history.
Add Consumer Statement on Credit Report
You can request to add a consumer statement on your credit report through the three major credit reporting agencies. A consumer statement provides an explanation of any negative marks on your report. Though it doesn’t address any potential errors, it can help tell more of your story about your credit report entries.
Potential lenders will be able to see the statement when they review your credit report. Thus, they might better understand the reason behind your late or missed payments. For instance, the current pandemic is a reasonable statement to add to your credit report if it’s the reason you default on your payments.
Every financial decision you make, especially during a financial hardship, is crucial. But having the right mindset, tools, and guidance can help you become financially sound even at the most unprecedented time. All you need to do is be proactive in securing your finances and managing your credit and debt.