How to protect your credit score during the COVID-19 crisis
Building good credit does take some time. Maintaining it takes work -- especially in a COVID-19-altered economy.
No matter what anyone else tells you, building good credit does take some time.
Maintaining it, however, is an active process that is only as good as the knowledge, information and tools you have in order to do so.
Right now, in our current climate, what does that look like? Well, for one, many people have more time on their hands than they typically would, and many who do what I do are here to help you put it to good use, run the race and win for the long-haul.
Here are a few things to DO, DON’T DO and REMEMBER during this time:
DO: Reach out to your creditors if you know you will be late or unable to make your monthly payments on time. Reaching out to them immediately will help prevent you from getting a derogatory remark on your account.
REMEMBER: Just one 30-day late or negative remark on your report can impact (decrease) your credit score by up to 90 points, so reaching out is crucial.
Also, many people don’t realize that having good credit doesn’t only allow you to get the best credit cards and the highest lines of credit in order to purchase more. In times of transition or change, as we are in right now, when there is an unexpected job loss or other unexpected financial hit and the future feels uncertain, good credit leverages you to do things like re-finance your loans including cars and mortgages, saving you thousands of dollars over the life of a loan and immediately reducing monthly payments when you need it the most.
DO: Allow yourself to be vulnerable and ask for help. A lot of times when people are going through hardships, they don’t want to reach out to their creditors because they don’t want to feel vulnerable. They often feel embarrassed and ashamed. However, if you reach out to your creditors and let them know what you’re going through they actually have internal departments that specialize in “hardships.” So picking up the phone can really prevent you from getting a derogatory/late remark on your report.
Allowing yourself to be vulnerable about our financial reality helps affords you the old 7P’s adage: Proper Planning and Preparation Prevents Piss Poor Performance.
DO: Be honest with yourself. It’s really about being honest and upfront about what’s happening. A lot of times it’s easier to just sweep things under the rug because of the way we have been conditioned to think. A lot of the decisions we make are based on the experiences of our past, including how we are reared.
A lot of those experiences are still part of our make-up today, and we operate from this place of fear without knowing it. Shame and embarrassment — being seen as weak or unable to provide — will cause us to make poor decisions or no decisions at all.
DO: Be willing and able to say, “Hey, I might not understand this, but let me be open to hearing some information.” It starts with your mindset.
You’d be surprised that there are a lot of people who tell others, “don’t get a credit card, you don’t need a credit card.” While I’m not suggesting or advocating inappropriate or excess use of credit cards or lines of credit that one can’t afford to pay back, you do need them to become “creditworthy.” In order to be considered creditworthy you need multiple accounts in different categories: Revolving and Installments loans. And so you need that to be able to grow your credit, but more importantly now because of the climate we are in.
DO: Monitoring all 3 credit bureaus. A lot of people use Credit Karma, which is a cool tool, but remember they only report on 2 of the 3 credit agencies: TransUnion and Equifax. There is still one more, which is Experian. Readers can pull all 3 reports for $1 (for the first 7 days) here.
DO: Share the trusted information that you do know and receive with the people around you, especially your children. Let your children see you work out different things so you can start imparting different practices and problem-solving skills within them. Let them see how to problem solve when there is an issue.
A lot of us don’t know how to do this. If you can do so in a way that does not disrupt their sense of safety and security right now, let them be involved in the conversations and develop their critical thinking and problem-solving skills.
A lot of times when we speak of legacy, particularly in the Black community where “generational wealth” has become the latest buzz words, we are only speaking of money and assets. But legacy also has to do with the good habits and behaviors we pass down.
It’s all in the mindset — just look at Kobe Bryant. Most of us will not benefit from the financial/monetary and other physical assets and contributions that he left for his family and the organizations that he cared about, but “Mamba Mentality,” as we know it, his legacy. We can all use this time to create our own legacies within our families even though we may be going through hardships. It can be a teachable moment not only for ourselves but for our children.
REMEMBER: While this is an unprecedented time in our history as a country and planet, this is a temporary moment. You can’t let a temporary moment get in the way of what your future could be. A temporary setback does not equal permanent failure, so do what you can do now.
Kenneth Todd Nelson is an entrepreneur and credit repair expert who is passionate about teaching others about sustaining and maintaining positive relationships with money as well as credit repair. Nelson is the co-owner of Good Credit Builders which he founded with his brother Marcus Nelson.