Credit Repair

7 Ways to Protect Your Credit If You’re Affected by a Government Shutdown

Government shutdowns have become an unfortunate fact of life in the United States. And while the suspension of federal services can make life difficult for any citizen, nobody suffers more than government employees and their families. In the 2018-2019 partial shutdown — the longest government shutdown in history — about 800,000 federal workers were furloughed or went without pay for more than a month. Many are still feeling the effects.

Here, we have gathered a few tips to help if you’re concerned that a government shutdown has hurt your credit.

7 ways to protect your credit from a government shutdown

During the most recent shutdown, many banks and credit unions began offering assistance for government workers needing extra time or help catching up. With that in mind, here are some steps to protect your credit while getting your finances back on track:

  1. Act swiftly. Contact your bank, credit union, credit card company or lender immediately. Explain that you’re in a financial bind because of the government shutdown. There may be aid available. Financial assistance can include fee waivers, loan modifications, deadline extensions, payroll advances and special loan products. For example, Wells Fargo is offering reversals and waivers of monthly fees and non-sufficient funds fees. Citibank may offer fee waivers and even forbearance on credit cards and mortgages.
  2. Pull your credit reports and scores. Get a copy of your credit report and pull your scores to see where you stand. You can grab your credit reports for free once per year at AnnualCreditReport.com. FICO Scores are available for purchase at MyFICO, though you may be able to get a free FICO Score from your credit card company, bank or credit union, so check there first. You can also get a free VantageScore by signing up for a My LendingTree account. The My LendingTree dashboard comes with credit monitoring and credit building resources.
  3. Send in a letter of goodwill if necessary. If you see a late payment on your report, consider sending a letter of goodwill to the lender or card issuer. A letter of goodwill is an explanation of why the late payment occurred with a request to have it removed in good faith. The creditor may be willing to remove the late payment if you have a good record of paying on time.
  4. Don’t overextend your credit. Pulling out your credit card may seem like the easiest way to get by while getting your finances back on track. But don’t swipe too often on purchases that aren’t absolutely essential. Racking up debt on a high- and variable-rate credit card can get you caught in a debt trap. Using too much of your revolving credit line can also increase your credit utilization ratio, which can hurt your credit score.
  5. Look for alternatives if you need to borrow. Shop around to review what installment loan products are available. Installment loans can have low fixed-interest rates, making them a more manageable long-term solution than variable interest credit cards. Several banks are offering special products for government workers affected by the shutdown.
  6. Get in touch with your credit union. Members of credit unions should call up customer service to see if there is government shutdown assistance provided. Some credit unions are creating specialized loan products, extending loans, waiving fees on early CD withdrawal penalties and offering free financial counseling to help government employees impacted by the recent shutdown.
  7. Find out how to manage unemployment benefits after the shutdown. Workers who received unemployment benefits may have to pay back the benefits once they receive backpay, and states may be able to garnish wages if the money isn’t paid back voluntarily. Contact your state unemployment agency for details.

There are solutions

Luckily, a payment that is only a few weeks late should not affect your credit score. According to Experian, payments that are less than 30 days late are typically not reported to the credit bureaus.

The government shutdown has ended, but getting back to normal may not happen overnight. Several of the resources above can help if you’re having trouble recovering financially.

If you’ve experienced financial hardship because of a shutdown, contact all of your bill issuers, credit card companies, banks and lenders to explain the situation. One late payment may not damage your credit. But it’s important to work with banks and lenders to come up with an action plan to protect yourself in the future.

 

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