How to Protect your Credit Score Following a Layoff
A layoff, however common in today’s economy, still comes as a bit of a shock to most Americans. Aside from being emotionally upset and mentally stressed, you may be worried if your credit is going to take a hit during this difficult, financial time.
The bottom line is that you can protect yourself and your credit now, even in the midst of a layoff.
Aside from curbing your spending and putting yourself on a tight budget, there are a variety of things you can do now to protect your finances and your credit following a layoff:
- Always pay your credit card on time – no matter what! The worst thing you can do is to simply throw your hands in the air and admit defeat. Do whatever you need to do to pay your credit card bill on time each and every month. You may want to consider lowering your monthly payment to cover just the minimum payment while you are unemployed, and that’s ok. However, not paying at all will do nothing more than put yourself in a sticky situation regarding your credit score.
- Use your emergency fund to get by – Now is the time to dip into your emergency savings funds, if necessary, to pay your bills and take care of your monthly debts and obligations. However difficult it may be to use your savings account, remind yourself that this is the reason you established it in the first place. You can also replace your savings once you get a new job, but you can’t repair your credit that easily.
- Avoid dipping into your 401K – In extreme circumstances you may need to borrow against your 401K to get by during a layoff or other financial difficulty, but this should be the exception and not the rule. The penalties and fees you will pay to borrow money from your 401K simply don’t make sense.
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