7 Ways To Minimize the Negative Impact on your Credit during the Government Shutdown

7 Ways To Minimize the Negative Impact on your Credit during the Government Shutdown

How does the government shutdown affect your credit?

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Maintaining a good credit score can be challenging enough when you are living paycheck to paycheck. Now imagine how difficult it would be if that paycheck were to be taken away from you. Due to the recent government shutdown, a complete loss in pay is a reality that many current government employees must face. In fact, while this article is being written, there are about 800,000 federal workers who have currently found themselves at work without pay and yet, they continue to wake up every morning and proceed to do their job for America (e.g.: Border Security Guards, National Parks employees, etc.) – without pay. There is no doubt that this could impact your credit in a negative manner. So how do you minimize the impact to your credit during the partial government shutdown?

1. Set a budget

The first step is to assess your current financial situation. Do so by asking yourself some fundamental questions- How much does it really cost you to live? Strip all your expenses down to the bare minimum. What are the essentials? Food and shelter. Outside of that, you may have to make some difficult choices on what to cut out of your budget and how much you can allocate to spend on bills. There are some amazing free tools that can help you, for example, the mobile app, ‘Mint’ where you can track your spending on a daily basis. By tracking your daily spending and transactions, you can work towards eliminating areas of overspending.

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Budgeting can help assess your personal financial situation

During this time, you may have limited funds and if you have not already, now is the perfect time to cut out any unnecessary expenses so that you can stay current on your bills. 

 

Step 1:
Try implementing an evaluation process before making any purchases, for example, take 24 hours to yourself before spending any money. 
During this time, you can evaluate whether or not you need whatever it is you want to buy, and if you find that after 24 hours you do in fact want to buy it, then the next step you could take is making a proper assessment on whether or not you can truly afford to continue with the purchase right now. 

Step 2:
This is a great way to eliminate any
impulse spending. This is especially essential if you are in a space of frugality, and during such times, a vast majority of us are.

 

Sometimes with the quick rhythm of our everyday lives, we find ourselves making decision’s too fast and it is common for consumers to make a purchase without even having thought about their daily budget. Taking time to evaluate before making any purchases is indeed a simple, but efficient tool to use and a great habit to form and apply as part of a continuing resolution.

2. Contact all your creditors and credit card issuers

If you are a federal government worker your employer may have already given you an example or template of a letter you can send out to your creditors and credit card issuers in order to inform them that you are being impacted by the government shutdown. However, if you have not received those forms, another reliable option you could take is contacting each of your creditors and inquiring about their hardship program

Major Credit Card Issuers might be able to assist you with their hardship program

The hardship program is for people who undergo any circumstances that are outside of their control and as a result, they cannot pay their bills on time. When you call, make sure that you ask for a Client Manager, an Account Manager or a Supervisor. You will have the best results if you end up talking to someone who is in a managerial position as opposed to someone working in a call center. Be very honest and clear about your situation. 

 

Be sure to let them know how much you appreciate banking with them, and assure them of your loyalty and make sure to mention your good payment history with them throughout the years. If they do not have a hardship program, you can ask them for an extension on your bill due dates. There are some credit card issuers that are extending the payment period for those affected by the partial shutdown. Another option would be to ask them to lower the minimum payment amount that is due. This will allow you to cut some of your spendings down and allow you to extend your savings.

3. Avoid Late Payments

A late payment can affect your score by as much as 100 points and as a result, it can impact your credit for up to 7 years

However, you can avoid this by making the minimum payment that is due every month. A 100-point impact can limit your approval for financing in the future. In fact, any significant decrease in your credit scores may even cause creditors to close your accounts or reduce your limits. 

 In many cases when the limits are reduced it may make your balances to be maxed out and that may cause even a bigger score decrease. Also, if a good standing account suddenly gets closed it may cause scores to drop.

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A written-out plan can avoid unnecessary stress and help you navigate through a financial hardship.

Bottom line, it is imperative to do your best and pay all bills on time because a late payment can affect up to 35% or more of your Fico score.

If you already have a late payment because of the government shutdown, you should most certainly reach out to your credit card issuer as soon as possible to ask them not to report it.

Staying on top of all your bills and constant communication with the creditors can potentially minimize any negative effects that may occur in the future.

4. Monitor your credit

Regardless of the government shutdown, it is very important to always monitor your credit. At LSI, we offer our everyone a unique Lifetime Credit Protection Plan which we are offering at no charge for 30 days to all federal employees affected by the government shutdown so that they can monitor their credit, and see the most accurate information that will help to repair their credit. 

 

All free services monitor your credit with only one or two of the three bureaus and therefore you never get to see the full picture. Creditors aren’t required by law to report on all three bureaus, and that is why it is so vital to see the entire picture of your credit history on all three major credit bureaus.

Keep an eye on all 3 Credit bureaus

The best way to see all 3 bureaus is to order a soft inquiry detailed 3-in-1 report of your Vantage score. This credit reporting tool will give you all the history on your credit and will reveal all the positive and negative items impacting your credit. These reports can be somewhat complicated and dense to read; therefore, it is best to review it with a trained professional. 

 

At LSI Credit Solutions, we offer everyone a Free Consultation to educate and help you better understand your credit situation.

5. Maximize Available Credit on Open Accounts to remain current

Going further into debt is not a good option and we do not recommend it. However, it might be your only option now if you have used up all your emergency funds. If that is the case, then yes, use credit to stay current on all your monthly payments so that you do not experience a significant late payment hit on your scores. It can be as big as 100 points decrease.

 

Going further into debt can be a slippery slope and you may find yourself deep in a hole before you even know it. Practice the 24-hour spending evaluation that was noted previously to ensure that you do not spend more than you absolutely need too. 

 

Once you are finally back to work, continue to operate on a strict budget and work towards developing a payment plan to get you out of debt.

6. Collections

LSI can handle ALL your collection calls

Perhaps you have collectors calling you repeatedly trying to collect on your past due debts. They may not be as flexible as your credit card issuer. So, what do you do? According to the Fair Debt Collections Practices Act, you can issue a cease and desist letter

 

This will stop them from contacting you. Lift the cease and desist when you are getting a paycheck again and decide that you can proceed to pay off or settle your collection.

 

Keep in mind, a cease and desist letter can be quite risky at times. The collection agency would have an option to issue a lawsuit if you stop communicating with them. That can soon turn into a judgment and an open door to the garnishment of your wages. Remember, if you need our help, our Advisors at LSI Credit Solutions can help handle all your collection calls and stop any judgment and garnishment activity.

7. Action Plan - LSI Will Repair Your Credit After The Government Shutdown

The government shutdown will eventually come to an end, and when it does, life will not go back to normal until your credit is restored. We recommend that you obtain a detailed 3-in1 Bureau Report to review everything that has may have impacted your credit. 

 

LSI Credit Solutions is offering a Free Credit Evaluation to all those affected by the government shutdown.

To pre-book your Free Credit Evaluation, click the button below. From there you can assemble the proper plan to help restore and repair your credit.

Since 2006 we have done this for thousands of our clients so that they can restore their credit and get their life back.

Because Good People deserve Good Credit!

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