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Credit Repair, Credit Report, Credit Score

How to Improve Your Credit Score During Difficult Times

On Behalf of Veitengruber Law | Sep 28,2020

It's easy to stay on top of debt and bills when you have a steady, reliable income. But if you lose your income or take a pay cut due to a recession, it may impact your ability to manage all of your debt. If your situation becomes dire enough and you have to take on more debt to manage your bills or begin to miss payments, your credit score could be drastically impacted. If you've experienced an economic downturn, you know it then becomes more difficult to get approved for new lines of credit. If you are able to maintain or improve upon your credit score, you will have a better chance of getting access to credit when you really need it. Here are some ways to maintain or even increase your credit during difficult financial times: 1. Check Your Score and Report At the first sign of economic strife, check your credit score and secure a copy of your credit report. Knowing where you stand will allow you to understand how much work you will need to do to maintain or improve your score. Now is also a good time to closely review your credit report for any mistakes. If you see an error (like a missed or late payment when you paid on time), you can file a dispute directly with the credit bureau you got the report from. Sign up for credit monitoring and get alerted when your report is updated. 2. Pay-off Past Due Debts Since your payment history accounts for 35% of your overall score, it is important to make payments on time, in full. If you are behind on any payments, it is a good idea to try to catch up as quickly as possible. Set up automatic payments to help you keep track of paying bills on time. 3. Adjust Your Spending and Stick to Your Budget When the economy takes a dip, it is a good idea to create a budget—even if you don’t anticipate taking a hit on your personal finances. If you already have a budget, negative changes in the economy can signal a good time to review your spending habits and cut back on nonessential expenses. During a recession, it is a good idea to eliminate nonessential items and reduce as many essential items as possible from your expenses. Try to avoid using credit cards during this time or only charge as much as you can pay off within a month. Keeping your debt to total credit ratio low will help buoy your credit score. 4. Build or Maintain Your Emergency Fund If you already have an emergency fund, consider putting any extra money you save by more stringent budgeting into that fund. If you don’t have an emergency fund yet, now is a great time to start one. Ideally, you want to have a sizable emergency fund before a recession or economic turn, but it is never too late to start saving for financial curveballs. You should have three to six months of essential expenses saved up in your emergency fund. If cash is already tight , finding a way to generate any extra income to go towards your emergency fund can save you a great deal of strife down the line if your main source of income does become disrupted. Being able to pay your bills for even one month after you’ve lost your income can help you maintain your credit score until you find other avenues of income. A recession can add financial stress to any household, but there are some simple steps that can help you stay on track. If you need to improve your credit score and need some guidance, Veitengruber Law can help. Our credit repair services provide customized solutions to increase your credit score and keep you afloat during financially challenging times.


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