How To Prevent An Emergency? By Fixing Your Credit Score

Have you been working to fix your credit score for a while now? We've all heard that bad credit can hurt you in unexpected ways, like when you've had to miss out on a rental apartment because of poor financial standing. 

But what about the unexpected ways it can hurt you? Take last year's outbreak of the Corona Virus, for example, which was spread through sharing soda bottles amongst different families. If your credit score isn't up-to-snuff, you could become sicker than you ever wanted to be attempting to do something as easy as quench your thirst.

I'm guessing you didn't know that a Coronavirus can lower your credit score. Ok, maybe you knew that. But do you know why it lowers your score? When talking about credit scores, many people assume that this number is some kind of "truth" of a person's financial responsibility.

 It is a complicated computer algorithm. And with a lot of zeros! To figure out how a virus can screw up your credit, to begin, we must define what a credit score is.

Credit Scores: Everything You Need To Know

A credit score is a number between or ranges from 300 to 850 that reflects your credit history, credit utilization, and payment history. Most lenders use FICO scores, which are based on information from your credit report.

A credit score is a good indication of your credit risk, and the higher it is, the safer you are to borrow money.

Your credit score is based on information that's in your credit report. Lenders look at your credit score to give you a good indication of how likely you are to pay back a loan, credit card, or other credit product.

Not surprisingly, then, your credit scores affect your ability to get credit. Your credit score is a picture or snapshot of your financial history, and lenders use it in making a decision if they should give you a loan, if they'll charge you a higher interest rate, or if they'll reject your application.

Your credit score isn't the only thing lenders look at. Your credit report covers details about your credit history, including details about your balances, your payment history, whether you've been sued, and whether you filed for bankruptcy.

A credit score is based on your credit history, the credit accounts you have, the amount of credit you have, the length of your credit history, and your credit utilization.

Credit scores are calculated based on a variety of data, but there's a common thread running through all of them: The more credit you use, and the more credit you need to borrow, the worse your score will be.

How Corona Virus affects your credit score?

The coronavirus epidemic has caused widespread devastation that changes in the way people use credit and handle their finances. Here are some ways your current situation could affect your credit score.

• Cancelling a credit card. The coronavirus epidemic has energized a large number of individuals to cancel or downgrade their cards. Cancelling an account can result in a "hard credit inquiry" — that's an inquiry on your credit report that can hurt your score temporarily. 

Cancelling your cards before you've paid off the balance you owe, however, can hurt your score quite a bit. (This can be particularly true if you're missing payments.)

• Changing your spending patterns. The pandemic has put a lot of people into financial limbo. People may be using credit cards for day-to-day expenses, trying to stretch their savings or relying on loans from friends or family. 

• Coronavirus outbreak has not gone unnoticed by credit reporting agencies. The fear is that new applicants are losing sight of their credit scores, which can result in missed payments, late payments and maxed out credit cards.

These changes can hurt your score because they suggest you're relying on credit instead of savings and savings alone.

However, there is a drawback to all of this: The coronavirus won't last forever. When the pandemic is over, you can expect your credit score to return to normal, as long as you don't repeat the behaviours that caused your score to dip in the first place.

What Is A Medical Debt?

Medical debt can take several forms. In general, medical debt is any financial obligation owed by a patient to a healthcare provider, supplier, or insurance company for covered services.

Medical debt is a financial obligation that arises from receiving medical treatment like covid 19 pandemic. Some forms of debt arise from paying for medical care.

These obligations may include:

• Amounts owed for services
• Deductibles
• Copayments
• Coinsurance
• Copayments
• Or deductibles for medical services. 

The term "medical debt" may also include other non-covered and optional services, such as prescription drugs or other non-covered services.

Medical debt can also refer to an obligation owed by a patient to a healthcare provider, supplier, or insurance company for covered services. 

How It Impacts Your Credit Report And Score

Medical debt isn't considered part of your monthly debt payments, but getting caught up with medical bills can make it harder to manage your other debts. And medical bills can also affect your credit score.

Medical debt can affect your credit score the same way that other types of debt do. That score is calculated based on five major factors:

  * Amounts you owe

  * Length of credit history

  * New credit

  * Types of credit

  * Payment history

The medical debt that hurts your credit the most is unpaid medical bills.

Medical debt, like any other type of debt, impacts your credit score and credit report. But credit reporting agencies typically consider medical debt to be the worst type of debt because it's often the result of an emergency.

Why fix my credit score now?

If you're not already thinking about fixing your credit score, now is the time.

The coronavirus pandemic has disrupted our country's day-to-day activities, and that includes everything from banking to shopping.

It's natural that you'd want to avoid thinking about your credit score at the moment. However, you should.

Your credit score is a fundamental indication of your financial health, and it has a significant effect on your financial life.

A good credit score may assist you in obtaining loans, obtaining lower interest rates on loans, and building credit, among other benefits.

A poor credit score may make things more difficult for you to get approved for loans, which can mean paying more for loans and higher interest rates. It can also affect your ability to rent an apartment or to buy a home, buy a car, or get good deals on other products and services.

How To Start Your Credit Cleanup

1. Request copies of your credit report.

The very first approach in credit report cleanup is to ascertain your current situation. You should get copies of your credit reports from each of the three main credit reporting agencies – Experian, Equifax, and Illion. Through April 20, 2022, you may get free credit reports from each credit agency by visiting AnnualCreditReport.com.

2. Conduct a credit report review

Once you've obtained your credit reports, thoroughly review each one to ensure that the information included within is correct. Consider the following:

Personal information, such as your account's name and address

Balances, credit limits, payment history, and current status of accounts (active, inactive or closed)

Bankruptcy and collection information, such as if any of your accounts have been declared past due for more than 30 days and sent to a collection agency.

3. Resolve credit report inaccuracies

If you find or discover any inaccuracies in your credit report, file a dispute immediately. You should initiate the dispute directly with the credit bureau that has the incorrect information, either online or by letter.

If the dispute is resolved and successful in your favour, the credit bureau is legally required to notify the other two bureaus of the resolution. However, you may want to submit a notification to the other two bureaus as well, just to be safe.

Additionally, if your dispute is rejected, you may submit a written statement that will be placed on your credit report. 

4. Stay organized.

If you have a hard time or if it is difficult keeping track of all your debt and payments, you may want to seek credit repair assistance. Different firms are available to assist. These include companies such as Australian Credit Lawyer.

For additional information, see our comprehensive guide to disputing a credit report mistake.

Read More: Do You Need Credit Repair? How to Increase Credit Score Fast

Common errors individuals make while attempting to repair their credit.

Credit is tricky, and fixing it can often be difficult.

The following are some of the most often made errors when trying to repair their credit.

* Not checking your credit reports. Credit scores are built from information in your credit reports. It is critical to do frequent credit reports checks to make sure your credit score is accurate.

* Ignoring negative information. If your credit reports contain negative information, such as a bankruptcy or foreclosure, you'll want to address them. Otherwise, your credit score could drop even lower.

* Not using credit responsibly. Without credit, you can't build your credit rating. But credit isn't something you should use irresponsibly. Paying off credit card debt every month and using your credit wisely will help improve your score.

* Only applying for credit when needed. When you initially get a credit card, it is critical to pay it off in full each month. Credit is essential and a very useful tool, but only if you use it wisely.

* Trying to improve credit you don't qualify for. If you're trying to repair credit, don't apply for cards or loans you don't qualify for. Use cards or loans you're eligible for, and pay off those balances each month.

* Not getting help soon enough. The longer you wait to address credit issues, the more complicated it becomes. You don't want to wait until your credit score is in its deep, do-or-die stages before you seek help. The longer you wait, the more fees and interest you're likely to accrue.

* Trying to repair your credit alone. Credit repair isn't something you can do on your own, and trying to do it on your own can make the process even more challenging. Credit repair companies help you avoid credit repair mistakes by helping you develop a solid plan.

The sooner you begin fixing your credit, the quicker you'll see improvements. Protect yourself by fixing your credit before you need to use it!

Australian Credit Lawyer has helped thousands of people repair their credit. If you have been refused credit or are struggling to obtain finance, we can help you.

As a reputable credit repair company, it won't just clean up your credit report. We will explain each mistake in your credit report and work with you to develop a strong, positive credit history.

 Sign up for FREE CREDIT ASSESSMENTnow!

Bottom Line

Fixing your credit score before an emergency is like putting an umbrella in your car. You may not need it, but that rainy day could be really bad. Let's take a look at the best way to fix your credit score and prevent a rainy day from ruining your finances and life for years down the road. By following our advice, you can make long-lasting changes and start building a good credit score today.