Suddenly losing your job may make your life and daily routine change drastically. If you're unemployed, you may also wonder how this new status may impact your credit. Not having a job or income doesn't mean your credit will plummet. There are multiple strategies to use to help protect your credit and keep your financial future bright. Here is what you can do right now to protect your credit after losing your job.
Have an Emergency Fund
First, before facing unemployment, it's smart to have an emergency fund in your bank account. If possible, everyone should secure an emergency fund of at least six months of expenses to help them survive in case of a job loss. If you have prepared for this and have an emergency fund ready to go, it will make unemployment less painful. If you weren't able to stock an emergency fund like millions of Americans who live paycheck to paycheck, don't panic. There are other ways to help yourself financially after a job loss.
File for Unemployment
After losing your job, one of the most important first steps is filing for unemployment. You'll need to go to your state's unemployment office or website and fill out forms indicating a job loss. Once your paperwork gets processed, you'll receive regular payments of a portion of your salary for a period of time. While it won't be as much as you would normally get from working, at least you'll get some income to keep yourself afloat.
Cut Back on Expenses
Getting through a period of time when you're unemployed is easier if you work diligently to lower your monthly expenses. That means no eating out at restaurants or getting carry out, no going to the movies, and no purchasing anything that's not necessary. Cutting back on wasteful spending will help you get more wiggle room in your budget and be able to pay for the necessities.
Ask for Discounts
You can also get more out of your new, lower monthly budget by seeking out discounts. When you desperately do need to purchase something, such as medicine, food, or other essentials, ask about discounts. You can also call companies like your car insurance company, internet provider, or gas and electric company to see if there are temporary discounts available to those suffering from financial hardship. Keep junk food off of grocery shopping lists and buy only wholesome ingredients. Many companies may surprisingly provide a discount to people who are recently unemployed.
Talk to Creditors
If you have credit card debt, be sure to also reach out to your creditors and negotiate lower payments while you're not working. You may also be able to ask about getting rid of late payment charges and interest during your time without a job. Loan providers, such as mortgage holders and car loan operators, may also help you get some payment relief if you call and speak to a customer representative.
Monitor Your Score
Even when you don't have any income and you're overwhelmed with monthly bills, it's also incredibly important to monitor your credit score. Watch out for any big changes that impact or lower your score during this difficult time period. If you see any significant changes because of late payments, talk to your creditors and ask them to remove any negatives related to your job loss. This can help keep your score from dipping and preserve your financial health.
It may also make sense to apply for a debt consolidation loan if you lose your job and are struggling to pay bills. If you have loans with a high-interest rate, you can take advantage of the most recent changes to the country's interest rates and get a loan to consolidate your high-interest debt. Paying everything off as one big loan with a low-interest rate may save lots of money each month and give you some financial relief.
Look into Government Programs
Another option is to turn to the government for help during a tough economic time. This year, millions of Americans are due to receive a stimulus check of approximately $1200 from the government. Additionally, families can get up to $500 per child under 16. If you aren't sure if you qualify to get these payments, make sure you check your income tax forms from 2019 and 2018. There are strict income requirements to get the $1200, but most people should be able to get the payments of $500 for each child.
Search for a Job
Once you lose your job, you also want to get right back into the workforce as quickly as possible. Start searching for your next opportunity right away. Update your skills and resume to make yourself more marketable for a variety of jobs. Take the initiative and reach out to potential employers to find a viable job opportunity quickly in your field.
Make Some Side Income
A job search in today's economy may be long and frustrating. While you search for the right position in your industry, be sure to take on some side projects or work to help bring in extra income while you're out of work. Consider selling things you have in your house and don't use anymore on secondhand yard sale website groups. Offer your professional services to friends and family if possible. You may also want to consider being a part-time driver or delivery shopper for people ordering groceries and supplies.
Finally, don’t be afraid or too proud to ask for help if you need it. For most people, there is at least one person in their circle of friends and family members they can turn to in a time of financial need. If you're struggling to pay your rent or buy food for your family, ask for help. It can be in the form of a loan that you slowly pay back when you get back on your feet, or someone may be willing to simply help you without expecting anything in return. Don't let things get too bad before asking for help.
While losing your job can be terrifying, there are some actions you can take to help keep your finances healthy and steady. Follow these tips to give yourself a way to survive during a tough economic time.
This article comes to you from a Personal Profitability partner.
This post was originally published on April 24, 2020, and updated on February 17, 2022.