A global pandemic will have financial repercussions that we can’t know the extent of. From lost wages to corporate closures, we are going to feel the results of COVID-19 on our wallets for the foreseeable future.
In a time of financial uncertainty, it’s understandable that your credit score may take a hit. Whether you have to take out a new loan, lean into your line of credit or simply slow down how much you’re saving, the impact of these actions pale when staying healthy and covering day-to-day expenses are your top priority. And while carrying higher credit balances may not have a positive impact on your credit score, you can breathe a bit easier knowing your credit score will rebound over time – as long as you don’t do anything to damage your credit long-term, like default on your debts.
If you are facing any of the below scenarios, know you are not alone. We’ve put together methods to help you walk the line between preserving your credit score as best as possible and finding a solution to see you through current financial challenges.
With national closures and wage disruption, you may be putting more expenses on your credit card without the same expectation that you can pay it off right away. If you’re not earning the income you’re used to, you’re likely going to need to dip into credit to cover your daily living. And because we don’t know how long this will go on for, it’s wise to keep some money in savings rather than using it all to pay off debt.
For now, continue making the payments you can – even if that’s just your minimum payment. Your balance may not work favourably on your credit score, but by making payments you’ll avoid going into collections, which is much more damaging to your credit history.
Tip: Remember to use lower-interest debt first, if possible. For example, a line of credit secured against your house typically offers a lower rate than a traditional credit card, helping to reduce interest charges.
Many Canadians are in an uncertain position regarding loan, mortgage, rent and bill payments during the coronavirus pandemic. If you’re one of those Canadians, make sure you stay in regular communication with your lender, landlord or service provider. They may be offering case-by-case relief measures to help customers stay afloat at this time. If you have a personal loan from Fairstone, read about our financial relief options here.
Even if it’s an uncomfortable conversation to have, creating a payment plan with your lender or making minimal payments is better than stopping cold turkey and defaulting on your loan.
Tip: While late or deferred payments may have an impact on your credit score, defaulting on a loan absolutely does and will have a larger impact for a longer time.
Reports of fraudsters taking advantage of Canadians during the pandemic are starting to circulate. It’s important to always be mindful of online security, particularly when it comes to your finances. Stay on top of financial fraud now and at all times by:
- Monitoring your credit report (either directly through TransUnion or Equifax or by subscribing to a third-party service)
- Watching credit card, line of credit and bank statements
- Carefully checking emails for sender name and email address; if something about the email looks fishy, don’t click on any links in it
- Avoiding giving personal and/or financial information over the phone or online unless it’s to a source you trust
Read more about avoiding financial fraud on our website here.
In extreme circumstances such as these, damage to your credit score may be unavoidable. If you are facing unexpected financial hardship due to the pandemic, focus on keeping yourself financially afloat as much as possible and communicating frequently with lenders. Make a financial plan for the duration of the pandemic, and afterward, and know that you’ll be able to improve your credit score again when your wage disruption ends.
If you’ve been financially impacted by COVID-19 (Coronavirus disease), we’re here to help. Fairstone offers loans solutions to help with unexpected expenses, bill consolidation and more. Please call your local branch to discuss your options with a Lending Specialist or click here for more information.