Tips to Protect Your Credit Score During COVID-19
Having good credit is essential if you want to make money in real estate investing. Getting approved for a turnkey rental loan is probably paramount in your agenda. But that could get complicated if you allow your credit score to dip during the COVID-19 pandemic. With more people out of work and finding it harder to pay bills, it’s more likely that credit scores will be a pervasive casualty of these challenging times. Don’t let your financial future be yet another victim of the pandemic. Consider these tips to protect your credit score during COVID-19.
Invest in Credit Monitoring
Identity thieves don’t take a break during times of global crises. If anything, their nefarious efforts are probably doubled. They’re hoping you’re so busy trying to make ends meet that you’ll get lax about protecting your financial identity.
For a nominal fee, you can get trusted credit monitoring services from institutions such as Transunion. You’ll be able to log in and get daily reports, including your credit score. This service is also helpful if you’re in a situation where you’re trying to maintain or build credit. You’ll be able to quickly see if your credit is being harmed or helped by your credit activities.
Avoid Taking Skip Payment Offers
Similar to what happened during the recession of 2008, many financial institutions are now offering skipped or deferred payments on outstanding debt. Per federal rules, utilities are also disallowed from disconnecting services for missed payments. All of this is commonly viewed as a welcome respite for those who are having trouble putting food on the table due to lost work. And, indeed it is very necessary in these troubled times. However, be aware that skipped, missed and deferred payments will still be reflected on your credit report. Even if there’s no official penalty from your car loan company, mortgage lender or credit card company, there will be ramifications when it comes to your credit score. Your score will drop due to missed or late payments, no matter how worthy the reason is. If you’re hoping for financing for a turnkey rental in the near future, do everything you can to make timely payments on your debts rather than accept a skip payment offer.
Don’t Fall For Predatory Lenders
If you’re like many people, you may have been receiving offers in the mail or in your inbox for personal loans. In these difficult times, it’s tempting to take advantage of an “easy loan” offer that says they can put several thousand dollars into your bank account overnight. You may even be thinking that’s a good way to pad your down payment savings account so you can buy a turnkey rental faster.
Don’t fall for these loan shark deals. They typically have exorbitant interest rates in the neighborhood of 30% or even higher. Their repayment terms are also problematic, taking automatic withdrawals out of your bank account on each upcoming payday until the loan is repaid. Worse, they’ll offer deferred repayments so you end up paying interest on top of interest. It’s a vicious circle that will deplete your cash and probably lead to a loan default, which will slash your credit score. If you get offers like these, shred them and delete them permanently from your inbox so you’re not tempted. No one ever got ahead by taking money from predatory lenders. They’re so bad that many states have prohibited them from soliciting to their residents.
Call Lenders to Request Payment Plans
If things get so dire that you aren’t able to pay your bills on time, get on the phone right away and let your creditors know what’s going on. Don’t worry that you’ll be judged. One thing about COVID-19 is that everyone is going through the same thing, so you’ll get empathy. Your lender may offer to let you skip a payment, but as explained earlier, try to avoid taking that option. Instead, ask if you can make a series of payments that are less than the “minimum required.” Considering the current conditions, most lenders will be amenable to this. Just be sure to make every payment by the official due dates. Then, try to bring your account current as soon as you can. This plan ensures that your payments will appear on your credit report as having been made on time. The fact that it’s less than the official minimum required is irrelevant since that information doesn’t appear on your credit report, so your score won’t be negatively affected. This is a great way to protect your credit score during COVID-19.
Look For Supplemental Income
When things are really looking grim and you’re worried that you’ll have to miss payments and risk a lowered credit score, take immediate action. Look for supplemental income that will enable you to make minimum payments on time. Just $300 extra dollars a month could take care of your car payment or a couple of credit card bills. There are lots of online freelance job sites where you or your family members can pick up relatively easy side gigs. It’s not a permanent solution, but things like this can help struggling families get through rough patches.
With COVID-19 in the world, it may not be about raising your credit score right now. But at the very least, you need to protect your current credit score so you don’t lose ground on your future real estate investment goals. These tips will help you to protect the score you’ve earned so far. If you’d like information about lending requirements for one of our turnkey rentals, please don’t hesitate to contact us. We’re here to help; now and in the future.