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How to Keep Good Credit During a Bad Economy

Posted on July 11, 2011

When the economy suffers a downtown, your credit, unfortunately, may suffer too. But this may be the worst possible time to have a bad credit score. If you find yourself back on the job market, you’ll often need to have good credit to land a job and keep paying your bills. In a recession or tough economy, take necessary precautions to keep your credit intact.

Build an emergency fund.

If you’re actively paying off debt by sending lump sum payments every month, you may want to scale back on those payments for a few months while you save up an emergency fund. An emergency fund can help keep you afloat for a few weeks or months if you suffer a pay cut or get laid off. But, if you’re really close to paying off your credit cards – like a couple of months – it’s okay to knock out those credit card bills. Then, once you’re done start up your emergency fund.

Call a credit counseling agency.

After suffering a job loss, you may not be able to afford your credit card payments. Get in touch with a credit counseling agency immediately. They can work with your creditors to lower your interest rate and minimum payment. Your credit card billing statement will have the number to a credit counseling agency. Otherwise, you can visit the National Foundation for Credit Counseling’s website,

Get a forbearance or deferment on your loans.

When you can’t afford your loan payments, contact your lender to see if there are forbearance or deferment options that will allow you to postpone your payments until your situation improves. Student loan lenders may even have an income contingent plan where your payments are based on your income. Talk to your lender before you miss a payment to get the best options. Once you fall behind, you may have to catch up on payments before you can receive any other payment options.

Don’t forget about non-credit obligations.

Any bill can ultimately hurt your credit if you fall far enough behind. These days, nearly every business hands over delinquent accounts to a debt collector. Those collectors will then list the delinquency on your credit report and pursue you for the debt. When you’re dealing with job loss and shortage of funds, the last thing you want is to have a debt collector on your back. So, pay up on all your services and cancel the ones you can’t afford to pay right now.

Pay attention to interest rate news.

When the Feds increase interest rates, payments on your variable interest rate credit cards and loans will probably go up, too. (The opposite happens when Federal interest rates go down.) By paying attention to news about interest rates, you have an idea of when your debt payments will also change and you can plan accordingly.

Since a bad economy can have a harsh impact on your finances and your wallet, it’s important that you do what’s necessary to keep up with your debt payments and protect your credit score.

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