How to Manage Your Credit Effectively (Even While Experiencing Hardship)

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manage-your-creditWhen times are tough, it’s easy to just throw all the rules out the window.

As you rehabilitate your credit to perhaps buy a home some day or at least achieve financial stability, you cannot afford to throw caution to the wind.

Below, we will discuss some tips for managing your credit even when times are tough.

Get Your Personal Finances in Order

At its root, your ability to control or fix your credit and build it over time depends on how you manage your income. If your hardship allows for it, look for extra ways to make money.

For instance, people of all economic levels are turning to Lyft or Uber to earn money driving people around. There are also ways to bring in passive income with nothing more than your home computer.

You also need to know where you are if you want to find out where you are going. How much do you spend on transportation, food, education, rent/mortgage, utilities, etc. each month? How much do you make?

Once you know how much you bring in and how much goes out, figure out where you can cut expenses. This is a budget, and you need to be sure to stick to it.

Managing Your Credit

First of all, the hardship you are going through will dictate how you manage your credit. For example, if you have been diagnosed with a terminal disease, your credit should be furthest from your mind.

Do what you can to make your final months as enjoyable as possible and to leave your family in a comfortable financial state.

If your hardship is losing a job, the loss of a loved one, a natural disaster destroying your property, a non-life-threatening injury, or other similar hardships, you should avoid making any big financial decisions.

A budget is still important, and your credit will likely be important in the near future as well. Make sure you are paying your most important bills first: mortgage/rent and utilities. You will also need money for food and transportation.

If you fail to pay your credit card bills, hospital bills, or other debts, it will negatively impact your credit score. So, do your best to make minimum payments on each.

You may have to work with your lenders to suspend or reduce your payments until your life is back in order. Taking out a line of credit is only advisable during a hardship if you think you can pay it back.

Once you are starting to recover from your emergency situation, bring all of your payments up to date and try to set some money aside so you are prepared for the next emergency.

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