COVID-19 Credit Checklist #1: Prepare
, by myFICO Team
How to be more financially resilient during the Coronavirus outbreak
1. Assess where you are financially.
Prioritize what gets paid if your income is interrupted or money gets tight due to an extended outbreak: mortgage/rent, insurance, utilities, credit cards, vehicle loans, student loans and other obligations.
2. Consider automatic payments for your priorities.
An unintended late mortgage or credit card payment could cause the greatest damage to your credit, on top of fees and a possible increase to your interest rate. Remember that with automatic payments you must have the funds available in your account prior to the date of withdrawal. If you cannot cover the amount, due to loss of employment or delay in a deposit, fees may be added on top of the missed payment impact to your score.
3. Do you have overdraft protection?
Overdraft protection taps into a savings account, credit card or second checking account if your account has insufficient funds to cover a transaction. This protection could help prevent declined transactions, returned checks or additional fees. There is usually no cost to enroll — you pay only when you use the service.
4. Paycheck delayed.
If you live in an area where an outbreak has already hit, or one that is high-risk, have a conversation with your employer and learn what alternative methods may be available to get paid during disruptions. If you depend on Social Security or other regular benefits, switching to electronic payments can protect your cash flow.
5. Investigate your credit card overlimit rules or protection programs.
Some are specific to premium cards. Most credit cards require that a consumer opts in to overlimit fees or a transaction will be declined. You may be subjected to overlimit fees for exceeding your credit limit. This could have negative repercussions on your credit as your score may continue to drop as your balances get closer to your limits. You could request a credit limit increase as a buffer.