How to Guard Your Credit During a Layoff

Having good credit is important for a number of reasons. Your credit score can make it easier for you to qualify for loans or high-value rewards credit cards. Good credit also means that you’ll pay less interest when you get a loan, which can save you huge amounts when you make large purchases, such as a car or a home.

Maintaining your credit requires managing your bills and making your minimum payments every month. If you get laid off from your job, something that used to be easy can now be hard.

If you’ve been laid off, there are some things that you can do to try to guard your credit while you find a new job.

1. Get a Copy of Your Credit Report

One of the first things that you should do is get a copy of your credit report. Knowing what your report looks like, what information appears on it, and what your credit score currently is can help you understand more about how credit works and how to protect yours.

Getting a copy of your report also means you can look for errors in the report and notify the credit bureaus. You might be able to boost your credit score if you find accounts that aren’t yours or other incorrect information.

Related: Experian Boost Review: Improve Your Credit Score for Free

There are lots of ways to get a copy of your credit report for free. Federal law requires that each credit bureau give consumers one free copy of their credit report each year. You can request a copy through

You can also use a credit monitoring service. Services, like myFICO, CreditSesame, and Credit Karma, let you see your score for free. They can also monitor your credit and notify you of changes, such as applications for new loans and new credit card accounts that appear on your report. They can help you find out about fraud sooner rather than later and get false information removed from your report.

2. Secure a Source of Income, If Possible

It sounds obvious, but if you’ve been laid off, one of the first things you should do is find a source of income. In most cases, that means filing for unemployment with your state government. Even if unemployment pays less than what you used to make, any amount of money coming into your bank account can help you buy necessities and pay the bills.

You can also consider other ways to earn money while you look for a new job, such as helping neighbors with odd jobs or signing up for a gig work app like Fiverr. Make sure to check your local laws about how earning money from work will affect your unemployment benefits.

Learn More: Fiverr Review

3. Reduce Your Spending Where Possible

Another priority for the newly unemployed is cutting spending. You still need to pay rent, buy groceries, and heat your home, but there are sure to be some places that you can reduce your budget.

Instead of going out to restaurants a few times a week, try cooking a meal at home. Buy store brand goods instead of expensive name brands. Cut down on leisure spending like new video games or trips to the movies.

If you put most of your spending on a credit card, this is also a good time to stop using your card whenever you can. The smaller the balance that you add to your card, the better. Paying with cash can make it easier to not spend money that you don’t have.

If you can save even a small amount each month, it can help you stretch your savings for longer while you work on your job hunt.

Related: Manage your money with Personal Capital.  It’s lets you track your budget while including information about your investment accounts.

4. Contact Your Lenders

If you expect to have trouble paying your credit card or loan bills, don’t wait to miss a payment. Reach out to your lenders and let them know what’s going on.

While not every lender will be willing to listen, many lenders will be willing to work with you. This is especially true during the coronavirus pandemic. Lenders understand that many borrowers are having trouble making their minimum payments and have set up programs to assist those borrowers where possible.

If you contact your lender you might be able to skip a payment or set up an alternative payment plan, which can help you keep your credit healthy.

Learn More: Apps That Loan You Money Now

5. Ask for a Natural Disaster Code on Your Credit Report

If your employer laid you off as a direct result of the coronavirus pandemic, you can reach out to your lenders and the credit bureaus to ask them to place a natural disaster code on your credit report.

This code notes that you’ve been affected by some natural disaster, such as the coronavirus, which some lenders may see as a mitigating circumstance that explains missed or late payments.

It’s important to note that having the natural disaster code on your report won’t protect your credit score. Missing payments will make your score drop as normal. However, it can help convince lenders looking at your report that the missed payment was out of your control.

6. Switch to Minimum Payments

If you’re making more than the minimum payment of debts, such as your mortgage or auto loan, it can make sense to switch to making just the minimum payment while you’re unemployed. You’ll pay more interest and it will take longer to repay the loan, but it can help you stretch your savings and go longer without having to miss a payment on one of your bills.

If you have credit card debt, make sure you stop using your credit card as soon as possible. This will prevent you from adding to your card balance and paying a huge interest rate. Instead, it gives you the chance to pay down your balance over time, even if you’re only making the minimum payment.

7. Defer Any Debts You Can

Some debts, such as student loans offer deferment programs for people experiencing economic hardship. If you have loans that you can defer, it can free you from the obligation of making monthly payments, letting you save your money for other needs without significantly impacting your credit.

Keep in mind that loans in deferment continue to accrue interest, so you’ll want to resume payments as soon as you’re able to.

8. Avoid Applying for New Loans and Credit Cards (in Most Cases)

In the vast majority of cases, you’ll want to avoid applying for new loans and credit cards after getting laid off. When you lose your main source of income, it can be tempting to apply for new loans to give you access to the money that you need to pay your bills.

However, most lenders won’t give a loan to someone who doesn’t have a source of income. Plus, every time you apply for a loan temporarily drops your credit score by a few points, meaning each application damages your credit. If you send out a dozen applications, you may be left with no new lines of credit and nothing but a lower credit score to show for it.

One scenario where applying for a new card could make sense is if you have a source of income, such as from a side hustle, and apply for a card with a 0% APR promotion. These cards let you pay no interest for the first twelve to eighteen months after you get the card.

If you have credit card debt or other small debts, you can transfer their balances to a new 0% APR card and make just the minimum payment each month while you hunt for a new job. This can help you save money on interest and consolidate multiple monthly bills into one that’s easier to manage.

9. Remember That Bad Credit Isn’t Permanent

Sometimes, there’s not much that you can do, especially if you’re unemployed for an extended period. Remember that your credit isn’t a permanent record. Things like missed or late payments do fall off of your report eventually and even people who declare bankruptcy can repair their credit with time and hard work.

While you should always do what you can to pay your monthly bills and maintain healthy credit, damaging your credit isn’t the worst thing that can happen to you. If you try, but you just can’t pay all your monthly bills, focus on keeping yourself healthy, and finding a new job. Once you’ve done that, you can begin taking steps to rebuild your damaged credit score.

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