6 ways to protect your credit after a natural disaster
Keeping bills current should be a top priority during recovery
you find yourself having to rebuild your home or your life after a natural
the last thing you want to think about is whether you paid your credit
card bill on time.
such mundane tasks as paying bills on the back burner while you attend to more
important issues -- such as finding temporary housing, for example -- would
seem to be the most logical course to follow, but it's not, financial experts
say. "A consumer's delinquent payments could ruin their credit score at a time
when they need access to credit the most," says Melinda Opperman, senior vice
president for Springboard
Nonprofit Consumer Management Inc., based in Riverside, Calif.
assessing property damage, calling insurance companies and applying for government
disaster assistance may be top of mind, here are the steps you should be taking
simultaneously to keep your old debts from destroying your financial
1. Get a
copy of your credit report. One of the first things you should do after a disaster is
get a copy of your credit report -- a move that could help you tremendously in
the future, says Tom Quinn, vice president of business development at myFICO.com. If the disaster causes financial difficulties, your credit score
may plunge. By having a copy of the credit report before it reflects any
financial impact resulting from the disaster, you can later make the case to a
lender or someone else checking your credit -- such as a potential landlord -- that
the disaster, not financial mismanagement, caused your low credit score, Quinn says. You can get a free credit report each year from each
of the three big credit bureaus (Experian, Equifax and TransUnion) from
a post-disaster budget. While you're waiting for a check from your insurance
company, take a realistic look at your savings and any income that's coming in.
Then look at what you need for the basics such as food and shelter. If your
house is destroyed, you may be able to free up some cash by eliminating some services
temporarily, such as electricity, cable TV or bottled water delivery. Your
post-disaster budget should be bare-bones, cutting out luxuries until you can
get back on your feet, Opperman says. Once you have your post-disaster budget,
you know how much you have left to pay on your credit cards and other debts. Even
if you have enough in savings to pay off an entire credit card, you might want
to budget minimum payments for a while to conserve cash until your life becomes
stable again, Opperman says.
A consumer's delinquent payments could ruin their credit score at a time
when they need access to credit the most.
Nonprofit Consumer Management
contact with creditors. Once you know how much money you're working with in your
new reality, it's time to reach out to your creditors. Sometimes when disasters
occur, credit card companies will email their customers to let them know
they're aware of the disaster and will waive late fees that month for those who
are affected. But don't let the communication stop there. Credit card issuers
will often do far more for you if they know about your specific situation, says
Natalie Brown, a spokeswoman for Wells Fargo. "Based on the customer's individual situation, those
options could include various short- and long-term payment assistance programs
or even temporary payment moratoriums," Brown says. When communicating with
your creditors, look on a statement or the back of your credit card to get the
number and call the creditors directly rather than responding to an email. That
way you protect yourself from scammers who may be fraudulently posing as
lenders to collect information and possibly steal the identities of disaster
all conversations. When contacting your creditors, be prepared to tell them
how the disaster affected you, how long you think your ability to pay will be
impacted and how much you can afford to put toward your bill. Keep a detailed
record of the conversation, knowing who you talked to, what they promised and
when the phone call took place. To be on the safe side, when talking to a
customer service representative, "say, 'I'm going to wait on the phone a moment
while you make your notes,' " Opperman says.
If a creditor agrees to a major change to the credit agreement, such as a
three-month suspension of payments, ask for something in writing.
the disaster's effects on your credit report. As
you're recovering financially from a disaster, you can add a 100-word statement to your credit report explaining that you experienced a natural disaster and it caused your credit to suffer. While this won't affect your credit score, it
lets any creditors who pull your report know what's going on and that you're a
responsible consumer who is working to bring any delinquent accounts current.
Depending on their policies, they may consider that in any lending decisions.
As your situation improves, you can have those comments modified or removed from
your credit report altogether, Opperman adds.
for long-term recovery funding. Your insurance policies and
government assistance may help you to rebuild your home or possibly replace
your car, but you may have to seek out additional resources to help you pay for
other debt obligations, particularly if your job was impacted by the disaster. One option is using online fundraising sites
to ask others to donate to your long-term recovery efforts, says Veronica Olah,
a spokeswoman for fundraising site Fundly. DisasterAssistance.gov also provides
links to short-term and long-term disaster assistance programs that may be able
to help you out.
See related: Video: Preparing your finance ahead of a disaster, Avoid debt through personal fundraising
Published: June 12, 2013
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