Protect Your Credit During a Natural Disaster

Disasters, whether a powerful hurricane or a health crisis such as the coronavirus pandemic, can cause economic devastation that lasts for months and hurts your credit.

But even if you're struggling because of job loss or property damage, you will need to stay on top of your finances. A good credit history can help you obtain a loan, get a credit card, rent an apartment or finance a phone.

Your credit score can weather the storm, but first you'll need to reach out to creditors, credit reporting agencies and others.

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Why Is Your Credit at Risk in a Disaster?

Credit card, loan and utility bills probably aren't top of mind if you're being treated for COVID-19 or picking up the pieces after a hurricane or wildfire. You might lose track of your ongoing financial responsibilities before and after a disaster for many reasons, such as:

-- You may need to buy items that are in short supply.

-- You may miss work, leading to lost wages.

-- You or your family may be impaired by health problems.

-- You may become the victim of a financial scam.

-- You may need to manage relocation logistics and costs.

-- You may miss incoming statements if you do not use paperless billing.

"Due dates are one thing that can easily slip your mind when you're focused on recovering from a disaster," says Gerri Detweiler, education director for Nav, which provides tools for business owners to manage their credit and access financing.

But missing your monthly credit card or loan payments could damage your credit rating.

What Damage Could Be Done to Your Credit?

If you miss payments or exceed credit limits, your credit score could drop unless you make arrangements with your creditors.

"If your financial troubles make their way to your credit reports, your credit scores could suffer," says credit expert John Ulzheimer, formerly of credit bureau Equifax and credit analytics firm FICO. "If you run up large balances on your credit cards, it's highly likely your credit scores will go down."

Equifax and the other two major national credit bureaus, Experian and TransUnion, keep your credit records, and FICO and VantageScore develop credit scores from their reports. Missed payments are a concern because payment history is the most important factor in your FICO score and your VantageScore.

Your score could also suffer if you ring up a lot of debt for supplies, health care costs, home repairs or other expenses. A high credit utilization ratio, or how much of your total available credit you're using, will drag down your FICO score and your VantageScore.

Aim to use about 30% of the available credit on any card, but keep in mind that disaster preparation and recovery expenses could temporarily increase the available credit you're using. People with the highest FICO credit scores have credit utilization ratios -- also called credit utilization rates -- below 10%.

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How Can Your Credit Card Issuer Help During the Coronavirus Pandemic?

Consumers can find coronavirus relief from many financial institutions, including the largest credit card issuers. Here are a few examples:

-- American Express offers a Financial Relief Program that can temporarily lower monthly payments and interest rates, provide relief from late payment fees, and prevent past-due accounts.

-- Chase may allow you to defer a payment, and if you're an active-duty service member, you may be eligible for other benefits.

-- Citi offers a collection forbearance program.

-- Wells Fargo allows customers, if approved, to defer two consecutive credit card payments.

Your first step is to call, email or chat with customer service. You can use mobile credit card apps for service, especially if call wait times are longer than usual.

Before you reach out, take a few notes about your financial situation for reference. This can help you make sure the solution your issuer offers is tailored to your needs.

How Can You Prepare for Credit Disruption From a Disaster?

Some disasters, such as the global coronavirus pandemic, leave little or no time for you to prepare financially. But if you have at least a few days, you can take steps to lessen the effects of a major disruption on your credit.

Use autopay. If you know that a disaster could strike soon, put your accounts on autopay to cover at least the minimum payments, Detweiler says. If you're making minimum payments, you can avoid negative reporting for missed payments.

Prioritize your debts. Consumer advocacy groups such as the National Consumer Law Center offer tips on how to keep up with your debts after a disaster.

Store paperwork safely. Place important financial documents in a safe deposit box or safe spot in your home where you and family members can easily access them. Include any information you would need to maintain accounts and contact creditors during a disaster.

Have key papers handy. Keep identification, such as copies of your driver's license, Social Security card and birth certificate, where you securely store your important financial documents. Don't forget your home insurance policy and contact information for the insurance company, which you will need in certain types of disasters.

Get disaster compensation quickly. Your insurance contacts will play a vital role after a disaster, from the initial review of claims to the timely payment of bills.

What if You Can't Pay Your Bills During or After a Disaster?

If you're struggling to stay on top of financial obligations because of a disaster, you may get some relief from creditors. When creditors don't have hardship programs, though, don't be afraid to ask for what you need.

Contact card issuers as soon as possible to report your situation and any address change if you have to relocate.

"Try to keep (your communication with creditors) as simple and to the point as possible. A lot of details may not be necessary for them to help you," Detweiler says.

Issuers might be able to waive interest charges or let you stretch out monthly payments for a time.

"A number of creditors will work with customers who are in a federally declared disaster area and may be willing to let you skip a payment or waive late fees that may result from a missed payment," Detweiler says. "Reach out to them as soon as you're safe and taking care of the essential things."

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How Can You Prevent Further Credit Damage?

You can protect your credit score by making sure your accounts are listed as current rather than delinquent. Weekly credit report access is free through April 2021.

You can also check with your card issuers to see whether they will report deferred payments or other arrangements to the credit bureaus. If you face financial strain created by COVID-19 and you worked out an arrangement, the issuer must follow certain credit reporting rules established in the coronavirus relief bill known as the CARES Act.

The following applies to accounts during the coronavirus pandemic:

-- If your account is current and you are allowed to delay payments, or similar accommodations are offered, the account must be reported as current.

-- If you make an agreement with a creditor and your account is delinquent, the account cannot continue to be reported as delinquent.

-- If you bring your account current, then it must be reported as current.