Credit scores are more important than ever. The coronavirus pandemic and the economic impact of COVID-19 has caused millions of people to apply for unemployment, ask for mortgage relief, and take a critical look at their finances. But why should you keep paying on your mortgage and bills during coronavirus? There are some simple reasons, and all of them have to do with your future AFTER the outbreak is over.
Credit Score Requirements Are Rising
What do we mean by this? FICO score requirements are already beginning to rise. Mortgage lenders are increasing their FICO score ranges and asking for better credit scores ahead of home loan approval and that is only one example from one financial sector.
If you were thinking about applying for a major line of credit before the coronavirus pandemic, the FICO score ranges you were looking at then likely don’t apply at all anymore when it comes to being offered the lowest possible interest rate, making the most affordable down payment, and paying certain closing costs.
FICO Scores Affect How Much Your Loan Costs You
And that’s not just true of home loans. The interest rates you are charged for your credit cards, auto loan, and mortgage loan will vary depending on your credit score. If you have good credit scores, the cost of applying for the auto loan or mortgage is lower. If you have bad credit, these loans cost you more money.
Your lender will ask for a larger down payment if your credit scores fall below a certain range. In some cases (like with FHA and VA mortgages) that down payment may be 10%, but for conventional mortgages that are not backed by the government, you may be asked to pay even more.
Credit scores were improving before the coronavirus outbreak, but in today’s new shelter-in-place ecomony has changed all that and if you haven’t looked at the state of things since the crisis started, you have a new reality to get used to.
Do Not Stop Paying Your Bills During The COVID-19 Outbreak If You Can Help It
That sounds easier said than done, yes? The basic reality is, those who protect their credit now thought not having late or missed payments will fare MUCH better on the other side of the outbreak. But what about people who simply cannot afford to make those payments? Believe it or not, there is help for you, too.
All you have to do is to contact your creditors and explain your situation and ask to make arrangements to suspend, modify, or delay payments and work WITH your creditors and not AGAINST them. If you do not call, you do not have protection against negative credit reporting.
In the current crisis, that negative credit reporting may be delayed in some cases, but if you do not act to protect your credit and work with your creditors (ALL of them, not just your auto lender or mortgage lender) your credit WILL suffer and it will be much harder to recover on the other side. Protect yourself NOW and you avoid much financial suffering later.
Joe Wallace is a writer and editor from Illinois. He was an editor and producer for Air Force Television News for 13 years, and has served as Managing Editor for publications including Gearwire.com, and Associate Editor for FHANewsBlog.com. He is also an experienced book and script editor specializing in non-fiction and documentary filmmaking.