Credit Report

How to Avoid Ruining Your Credit During Natural Disaster

EPF Last Update: May 22, 2020

When a natural disaster strikes – like what we just witnessed with Hurricane Dorian – you’re often burdened with several unplanned expenses. And depending on the extent of the storm, the financial and emotional stress can cause you to forget about your loan and credit card payments.

How Can a Natural Disaster Hurt Your Credit Score?

When a storm hits, it’s easy to lose track of your financial obligations or get side-tracked by the more important issues at hand. Whether it’s purchasing emergency supplies, relocation or evacuation costs or lost wages from having to miss work – a natural disaster decreases your earnings, while simultaneously increasing your expenses.

So what can you do?

Plan ahead so you don’t fall behind on your payments. If the power goes out, you won’t have the connectivity to make online payments. Thus, you should create a disaster plan with a relative or friend outside of your state so you can look after each other’s finances during blackout periods.

How Will Your Actual Score be Affected?

Considering your payment history accounts for 35% of your FICO Score, missing a payment can have a significant impact on your credit score. Lenders report delinquent behavior to reporting agencies – like Experian, TransUnion and Equifax – who in turn, make the necessary adjustments to your score.

Moreover, when you’re in the eye of the storm, credit cards are needed for short-term financial relief. However, because 30% of your FICO Score is determined by your credit usage, spending beyond 30% of your limit can hurt your credit score. It’s understandable that in times of crisis you may have no other choice but to exceed this ratio. However, planning ahead can help keep you from extending too far.

How Do You Prepare Financially for a Natural Disaster?

In the case of Hurricane Dorian, weather services issued warnings about the storm several days before it made landfall. When you have time to plan ahead, you should set all of your bill payments to auto pay. By doing so, you ensure the minimum payment is made for each account and no negative action can be taken against your credit score.

Second, you should create a folder with all of the important financial information you’ll need in case you have to evacuate. Include the names of your accounts, the account numbers and the contact information of your creditors. Also include your driver’s license, Social Security card and birth certificate for verification purposes. As well, pack all of your insurance policies and insurer contact information, so you can stay up-to-date on your claim and when it will be processed.

Can You Seek Help from Creditors?

During severe storms, creditors are usually willing to help with the recovery process. You need to contact them directly, but most creditors will empathize with your situation. They’ll often waive late fees or let you extend/skip a payment so you have more time to get back on your feet. Remember though, you should reach out to them as early as possible, and make sure you give them your temporary address if you’re forced to relocate.

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