If you find yourself having to rebuild your home or your life
after a natural disaster, such as the recent Oklahoma tornadoes or
the California wildfires, the last thing you want to think about is
whether you paid your Discover credit card bill on time.
Putting such mundane tasks as paying bills on the back burner
while you attend to more important issues -- such as finding
temporary housing, for example -- would seem to be the most logical
course to follow, but it's not, financial experts say. "A
consumer's delinquent payments could ruin their credit score at a
time when they need access to credit the most," says Melinda
Opperman, senior vice president for Springboard Nonprofit Consumer
Management Inc., based in Riverside, Calif.
While assessing property damage, calling insurance companies and
applying for government disaster assistance may be top of mind,
here are the steps you should be taking simultaneously to keep your
old debts from destroying your financial future.
1. Get a copy of your credit report.
One of the first things you should do after a disaster is get a
copy of your credit report -- a move that could help you
tremendously in the future, says Tom Quinn, vice president of
business development at myFICO.com. If the disaster causes
financial difficulties, your credit score may plunge. By having a
copy of the credit report before it reflects any financial impact
resulting from the disaster, you can later make the case to a
lender or someone else checking your credit -- such as a potential
landlord -- that the disaster, not financial mismanagement, caused
your low credit score, Quinn says. You can get a free credit report
each year from each of the three big credit bureaus (Experian,
Equifax and TransUnion) from
2. Create a post-disaster budget.
While you're waiting for a check from your insurance company, take
a realistic look at your savings and any income that's coming in.
Then look at what you need for the basics such as food and shelter.
If your house is destroyed, you may be able to free up some cash by
eliminating some services temporarily, such as electricity, cable
TV or bottled water delivery. Your post-disaster budget should be
bare-bones, cutting out luxuries until you can get back on your
feet, Opperman says. Once you have your post-disaster budget, you
know how much you have left to pay on your credit cards and other
debts. Even if you have enough in savings to pay off an entire
credit card, you might want to budget minimum payments for a while
to conserve cash until your life becomes stable again, Opperman
3. Initiate contact with creditors.
Once you know how much money you're working with in your new
reality, it's time to reach out to your creditors. Sometimes when
disasters occur, credit card companies will email their customers
to let them know they're aware of the disaster and will waive late
fees that month for those who are affected. But don't let the
communication stop there. Credit card issuers will often do far
more for you if they know about your specific situation, says
Natalie Brown, a spokeswoman for Wells Fargo. "Based on the
customer's individual situation, those options could include
various short- and long-term payment assistance programs or even
temporary payment moratoriums," Brown says. When communicating with
your creditors, look on a statement or the back of your credit card
to get the number and call the creditors directly rather than
responding to an email. That way you
protect yourself from scammers
who may be fraudulently posing as lenders to collect information
and possibly steal the identities of disaster
4. Document all conversations.
When contacting your creditors, be prepared to tell them how the
disaster affected you, how long you think your ability to pay will
be impacted and how much you can afford to put toward your bill.
Keep a detailed record of the conversation, knowing who you talked
to, what they promised and when the phone call took place. To be on
the safe side, when talking to a customer service representative,
"say, 'I'm going to wait on the phone a moment while you make your
notes,' " Opperman says. If a creditor agrees to a major
change to the credit agreement, such as a three-month suspension of
payments, ask for something in writing.
5. Explain the disaster's effects on your credit
As you're recovering financially from a disaster, you can add a
to your credit report explaining that you experienced a natural
disaster and it caused your credit to suffer. While this won't
affect your credit score, it lets any creditors who pull your
report know what's going on and that you're a responsible consumer
who is working to bring any delinquent accounts current. Depending
on their policies, they may consider that in any lending decisions.
As your situation improves, you can have those comments modified or
removed from your credit report altogether, Opperman adds.
6. Look for long-term recovery funding.
Your insurance policies and government assistance may help you to
rebuild your home or possibly replace your car, but you may have to
seek out additional resources to help you pay for other debt
obligations, particularly if your job was impacted by the
disaster. One option is using online fundraising sites to ask
others to donate to your long-term recovery efforts, says Veronica
Olah, a spokeswoman for fundraising site Fundly.
also provides links to short-term and long-term disaster assistance
programs that may be able to help you out.
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