Rebuilding your home or life can be difficult after a natural disaster strikes. You may have to get involved in assessing property damage, having compensation discussions with insurance companies, and struggling hard to restore normalcy. Among these concerns, you may also be worried about how non-payment of credit card bills or loans timely will affect your FICO credit score or how it will take a toll on your ability to borrow in the future? The reality is that your credit score is not impacted by the fact that you reside in a disaster-prone area; however, missing a payment deadline or using credit cards beyond their limit can affect your credit score adversely.
The good news is that there are still some steps that you can take to avoid ruining your credit score, and following these 4 tips will make your task easier:
Obtain Your Credit Report
The first thing that you should do is that you must get a copy of your FICO credit report if you believe natural disasters have wrecked your finances, and that you may fail in fulfilling your credit obligations timely. You can later make a case to a lender that a disaster and not your financial mismanagement the reason behind the drop in your credit score.
Inform Your Lenders Fast
Contact your bank and lenders as soon as possible and apprise them of your situation that you can’t pay your bills on time because a disaster has struck your home. Most lenders have a plan in place to deal with such situations and your payment may be deferred temporarily. Every lender has different policies; so, make a point to contact all of them. There is a good possibility that they may waive off late payment fee or extend the payment date if they know about your situation in advance. However, assuming that they will automatically know your situation and offer relief would be a mistake.
Keep a Record of All the Conversations
Keep a detailed record of your conversation with creditors such as who you talked to, when you called them, and what they promised to you. In case a creditor agrees to offer you relief, ask for something in writing. This is again very important as it will make your case stronger.
Explain Your Situation in Credit Report
Adding an explanation in the credit report that you experienced a natural disaster and it lowered your credit score will make your case stronger. Though doing so won’t improve your credit score, any creditor pulling off the report will know your situation quickly. It will also put you in a positive light and some creditors may consider your situation more sympathetically.
Controlling such extreme eventualities is not possible, but you can still take some steps for minimizing the damage. Credit scores are affected due to changes in consumer behavior toward credit and not due to exigencies such as natural disasters. So, these strategies will help you manage your credit score effectively.