Credit lessons learned from Superstorm Sandy
When disaster hits, good credit helps pave the road to recovery
By Dawn Papandrea
Editor's note: CreditCards.com writer Dawn Papandrea lives
in Staten Island, one of the areas worst hit by Superstorm Sandy, which ravaged
the U.S. East Coast in October 2012.
As residents of the East Coast fled their homes to
escape the merciless destruction of Superstorm Sandy, the last things on their
minds were their credit scores and their available credit.
However, once the storm had passed and residents returned
to what was left -- if anything -- of their ravaged homes, being financially prepared made
all the difference in how easily and quickly they could begin rebuilding.
Photography by Bobby Putney, aKWmp Inc.
For those with little savings or poor credit, it's been a
waiting game -- waiting for insurance and the Federal Emergency Management Agency (FEMA) and other sources of assistance
before they can forge ahead. It's been a wake-up call (especially as New Year's
resolution time approaches) to get my own finances in order, pay down those
remaining debts and save more. I was lucky this time, but as Sandy proved, you
just never know when a disaster can uproot all that you thought was safe and
Here's what credit experts say are the most important credit lessons we can all learn
1. Credit scores matter all the time. Keeping tabs on your credit score might not always be top priority if you aren't looking to apply for any new lines
of credit. Many middle-class Sandy victims who already owned homes and
cars are learning the hard way now (as they try to take out new loans) that
slip-ups in credit can prove costly. Take for instance those whose vehicles
"Depending on your insurance coverage, you may or may not
have enough money to purchase a new or used car outright with your insurance
payments," says Hallie Hawkins, certified credit report reviewer
for Get It Together, a company that offers financial education. "People with credit scores above 720 may qualify for car loans with
the lowest interest rate." On the other hand, she says, someone
with a credit score under 600 will pay a lot higher rate or be required to
come up with a larger down payment.
The same applies for those people without flood
insurance, who simply can't rebuild with the amount of FEMA assistance being
offered and who now have to seek out loans. The Small Business Administration
Disaster Loan is a government-sponsored low interest program, but requires applicants to have a strong credit score to qualify.
2. Credit cards can become
a temporary lifeline. As
mold eats away at what used to be your child's playroom or your house remains
without heat because your furnace took on sea water, waiting around for
insurance adjusters to show up or send a check can be daunting. Many of my
friends are using up their savings, dipping into retirement accounts and, yes,
using credit cards so they can start cleaning out and restoring their homes to a
When you're tight for funds and have gone through some kind of trauma like Sandy, those in good credit shape will have a lot more opportunity and a lot less stress.
North Shore Advisory
While waiting for the insurance checks to start rolling in, access to cash or credit is vital. For those
with high card balances or poor credit prior to Sandy, credit cards aren't going
to be much help. Those with an excellent credit history, however, can shop
around for credit cards with a zero interest rate introductory period, says Tracy
Becker, president of North Shore Advisory, which offers credit repair
services. "When you're tight for funds
and have gone through some kind of trauma like Sandy, those in good credit
shape will have a lot more opportunity and a lot less stress," she says. It's
also helpful to keep a balance-free credit card on hand that can be pulled out
in a pinch.
3. Creditors do care. Because of my ZIP code, all of my
creditors contacted me to offer a reprieve on payments or to see how they could
help. Luckily, I didn't need to take them up on their offers, but it's not a
bad idea to reach out should a personal tragedy ever arise. My mother (whose
home is in the so-called "Zone A" evacuation area of Staten Island) did just
that after receiving a letter that she qualified for an interest-free period on
her Discover card just for being a good customer (unrelated to Sandy). When she
called to accept, she mentioned her recent expenses from the storm. She was put
on hold, and then told that the bank would backdate the offer to include the
purchases of her new hot water heater and furnace, which had to be replaced after
the storm. She was thrilled, but had she not asked, interest on those items
would already be accumulating.
Don't hesitate to reach out. "Call [creditors] right away and tell them if you will be late on payments and ask for
forgiveness," says Hawkins. Be careful, though, she warns. "Creditors may use this as an
excuse to check your credit and reduce your credit limit," she says. If you do
contact your credit companies, be sure to document who you spoke with and when,
and get specifics on how or if your request will affect your credit status,
4. Don't put off emergency
planning. Just as
people were stuck in their homes without working flashlights or a
battery-operated radio, very few people had an emergency fund large enough to
deal with the damage caused by the storm. That's not hard to imagine, given the
magnitude of the devastation. But having a head start with your own money is still
better than resorting to interest-laden borrowing. "Opening a special savings
account that you don't have easy access to is a great idea," says Becker.
As far as your credit goes, don't slack when it comes to
your financial responsibilities. Request your free credit reports from each of
the three major credit bureaus (Experian, Equifax and TransUnion), and make a
plan to improve weaknesses and fix any errors. The reports are available for
free once per year from each credit bureau at AnnualCreditReport.com. "There is
no waving your magic wand to make the damage go away," says Hawkins. Depending
on your situation, it can take six months to a year to see major improvements
in credit scores, she says.
If there's one important thing to remember from Sandy,
it's this warning from Hawkins: "The decisions you make today impact your options
tomorrow." Even as I hope and pray that the worst storm in our lifetime is now
behind us, I'll be working to put my family in a better financial position to
handle whatever might come next.
See related: Pre-disaster financial preparedness checklist, Alternate strategies to saving for emergency funds
Published: December 14, 2012
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