How Does a Natural or Declared Disaster Impact My Credit?

How Does a Natural or Declared Disaster Impact My Credit? article image.

If you've been affected by a natural disaster in recent years, you're not alone. The number of weather-related natural catastrophes more than quadrupled between 1980 and 2018, according to the Insurance Information Institute. Disasters aren't limited to natural events like floods, wildfires or tornadoes, however; state governors and the president may also declare a disaster based on a terrorist act or disease outbreak, like what was done in response to COVID-19.

In addition to the direct harm it can cause to your health or livelihood, a natural or declared disaster can affect your credit by making it harder for you to pay your bills or forcing you to rely on credit cards to make necessary purchases. Fortunately, there are several steps you can take to keep a disaster from damaging your credit.

Ways a Natural or Declared Disaster Can Affect Your Credit

A natural or declared disaster may destroy your home, damage your possessions or hurt you and your family. But while you're putting your life back together, a disaster can also impact your credit in several ways.

If you're injured or have to take time off to care for injured family members, you might not be able to go to work. Or you might be laid off or have your wages or hours cut. With your income reduced, you may find it harder to make your monthly payments, such as your credit card bills, rent, utility payments or mortgage. Missing payments can have a negative impact on your credit score.

To help make ends meet, you might need to turn to credit cards to pay ordinary expenses. And even if your income isn't affected, a disaster often means extra expenses. For example, after a flood or fire that damages your home, you might have to pay a hefty insurance deductible, pay a contractor for repairs or even pay hospital bills.

On the positive side, your credit cards may be able cover these disaster-related expenses and provide a quick source of needed cash. But using them will increase your credit utilization ratio, or the percentage of your available credit you're using. A credit utilization ratio of 30% or higher will have a more significant negative effect on your credit scores. Ideally, you should try to pay your balances in full each month or at least keep your credit card balances as low as possible.

Despite the possible negative consequences of a disaster, there are steps you can take to preserve your credit and stay on solid financial footing.

How to Get Help During a Crisis

After a natural or declared disaster, your top priorities are taking care of your family, assessing any damage to your home and meeting immediate needs such as food, shelter and medical care. But what should you do if you're having financial difficulty as a result of a natural or declared disaster and think you may have trouble paying your bills?

Contact your lenders and credit card issuers as soon as possible to ask about hardship options. Don't wait until you've already missed a payment: In some cases, you won't be eligible for hardship options unless you contact lenders before your payment is due.

The hardship options available to you will depend on your lender and your individual situation. Lenders may temporarily reduce your interest rate or your payments, pause your payments for a period of time, or place loans in deferment. For example, some types of student loans may be eligible for deferment; homeowners may be able to get a mortgage forbearance, which can reduce or suspend mortgage payments for up to 12 months. When a loan is in deferment or forbearance, lenders typically won't report nonpayment to the credit bureaus.

In addition to contacting your lenders and creditors, reach out to your utility, cellphone and cable providers, as well as any other monthly services you pay for, to see if they can offer flexible payment options. You'll never know what kind of relief is available unless you ask.

Are your taxes coming due in the near future? Contact the IRS and your state tax authority to see if you're eligible for any special tax relief as a victim or a natural or declared disaster. The IRS may give you a deadline extension, let you split your tax bill into payments, or even reduce the amount you owe.

Tips for Protecting Your Credit During a Disaster

Once you've made sure you and your family's immediate needs are squared away, and you start thinking about what it will take to get your life back to normal, it's a good idea to keep an eye on your credit, too.

Unfortunately, thieves and scam artists often take advantage of disasters to prey on people who are seeking help to rebuild their lives. That's why it's critical to monitor your credit in the aftermath of a disaster. Checking your credit report can help you prevent crimes such as identity theft or fraudulent use of your credit cards. It also helps to protect your credit score.

Be sure to check your credit with all three major national credit bureaus (Experian, TransUnion and Equifax). You can get a free credit score and a free credit report from Experian. In response to the COVID-19 crisis, you also can request a free credit report once a week from each of the national credit reporting companies through April 20, 2022.

Review your credit report carefully, looking for any inaccuracies or suspicious activity. If you find anything you believe to be inaccurate, you can dispute the information with the credit reporting agency where you found the information. Disputing information on your credit report is free and easy to do online, by phone or by mail.

Continue to monitor your credit on a regular basis. Experian's free credit monitoring service is an easy way to get alerts of any suspicious activity on your credit report.

Disaster Plan

Whether it's natural or man-made, a disaster can throw your community, your life and your finances into disarray. But by reaching out to creditors quickly and monitoring your credit report, you can protect your credit and bounce back from a disaster with your credit score intact.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score