With the coronavirus pandemic taking the world by shock in 2020, many people weren’t prepared for the events that ensued. From jobs losses, to not having a steady income, to not knowing where the next paycheck was coming from – and even what may happen to their credit.
Fortunately for many, Congress passed The CARES Act, which protects consumers from negative reporting – provided their creditors had been contacted in order to work out an accomodation to either defer, or extend their payments. Unfortunately however, many people didn’t, and their credit suffered terribly as a result. If this sounds like you or know someone who else is struggling with their credit, Jose Rodriguez, aka The Credit Dude shares 5 actionable tips that will help get your credit score back on track and ultimately, maximize it.
1. Call Your Creditors
Make sure that you never ignore phone calls, emails, or letters regarding past due accounts, as it is the perfect time to find out what is available for you and whether or not they are offering any accomodations still. Rather than ignoring overdue accounts, mention that you have been affected by COVID-19. That way you will be able to take full advantage of any courtesy adjustments that are available to you when it comes to late payments, or even interest that is charged.
Even though it might not feel like it, the best option is to always pick up the phone to determine what’s available and how long for. Even just deferment of a couple of months on a car or mortgage, can give you the breathing room you need to pay off other accounts, or build your nest egg for the future. Ensure to ask creditors if they require full payment for the deferred payments, or if they are able to place it on the back end of the loan, after the accommodation period is over.
2. Apply for a Personal Loan
Another huge advantage you can leverage to pay off all of your credit cards is applying for a personal loan. Doing this at your local credit union allows you to make just one monthly payment towards your personal loan. This allows you to keep credit cards open while transferring your debt from revolving to instalment – which raises your credit score.
Keep the loan short and refrain from applying for a 60-month loan – aim for 24 or 36 months. You don’t want to take out a loan for 5 years and then proceed to max out your credit cards once again, as it will leave you in a position even worse than before.
3. Ask for Credit Limit Increases
If you have low balances on your cards, you are able to get your credit score higher through getting higher credit limits. If you are approved for a personal loan to pay down credit cards you have, or even if you are able to pay them down on your own, ask for a limit increase after the balance has gone under 30% of the credit limit.
This increases credit available to you, which will add towards getting your credit score as high as possible. Credit utilization, which is the amount owing on your credit cards in comparison to available credit, is 30% of your credit score – roughly 165 points.
4. Rent Your Car on Turo
A company that enable you to rent out your car to strangers and get paid for it, is Turo. Doing this helps with monthly payments and even making some extra money to cover some bills. “I have friends that have 2 or 3 cars on Turo and not only are their car payments covered, but they are able to use anything extra to cover their water, cable and electric bills” Jose explains.
Visit the site or download the app to check out what people are saying and view the cars rented out in your area, so you can see what you’d be able to rent your car out for. If for example, your car payment is $500 a month and you are able to rent your car for $50 a day, you’d be able to make an extra $1,500 for little to no work.
5. Open a Business
If there’s one thing that COVID-19 has shown us, its that you need to be adaptable and always have a back up plan. Whether you have a special talent or hobby that can make you money, nowadays you can make just about anything and sell it on Etsy, Amazon or Let Go. “I saw someone going to garage sales and buying this for a few bucks and then selling them on Ebay for a lot more and making an amazing profit. Even if you make bracelets, facemasks, or even over a service like laundry, haircuts, or even cutting hair, that can help you start your own business” Jose explains.
This could easily help to generate between $500-$1000 extra a month that could go towards paying off debt on your credit report or your credit cards. Every single penny counts when it comes to paying off debt. It definitely helps to not only maximize your credit score, but also saves you more money in interest – if you’re able to pay it off sooner.
Implement these tips from The Credit Dude to maximize your credit score and get back on the right track after COVID-19. Make sure to follow Jose on Instagram at @thecreditdude where he shares daily tips on how to improve your credit and master your finances. You can also visit his website here.