For the 1 in 6 Americans who have lost their jobs due to the coronavirus, their credit score might be the last thing on their minds.
But Amanda Carney, president and co-founder of Working Credit, a Chicago-based nonprofit credit-building organization, wants people to know that amid the whirl of financial worries, protecting your credit score can help ensure continued access to money during periods of reduced income and recovery.
“Your credit score is really important. In normal times it [good credit] means that you can pay less for things like car loans, and car insurance and credit loans, and qualify for a mortgage,” said Carney. “But in a time of crisis, because we’re not in normal times, if you have good credit, you may be able to access additional affordable credit if you need it. So it’s going to help you weather this storm, and then once we move into recovery, people with good credit are going to have more options and at lower rates for addressing the debt that they may have incurred in order to weather this crisis.”
Carney says taking control of your credit means doing something that often makes people nervous – calling your creditors. But unlike past financial crises, Carney says creditors are willing and eager to work with people during the pandemic.
“This crisis is very different from the 2008 Great Recession. This time, creditors are very anxious to work with you in terms of payment arrangements. So the number one thing we’re emphasizing is you need to talk to your creditors,” said Carney.
Carney also recommends using credit cards to cover emergency expenses instead of payday loans. “The average credit card we see has an interest rate of about 19%. When you compare that to a payday loan, which when you combine interest and fees, it’s 400%,” she said.
Click here to see Working Credit’s guidelines for protecting your credit score during the pandemic.