It’s a difficult time for the 800,000 or so government employees furloughed because of the Congressional deadlock over the budget, and for the contractors, merchants or business owners who have lost revenue because of the government shutdown. With no paychecks coming in, many will have trouble paying their debts, including mortgages, loans and credit card bills. And even if federal workers get back pay once the crisis is over—and employees of private businesses are not likely to—they’re going to be playing catch up on their bills for several weeks.
Here are some strategies for staying on top of your bills—and for keeping your credit score untarnished—during the shutdown. But you don’t have to be a federal employee to benefit from these ideas; most are applicable to anyone facing problems paying their bills because of a sickness, medical emergency, etc.
Take stock of your assets. How much do you have in savings? Are you eligible for unemployment benefits for the time you’ve been off work? (Remember that you’ll have to pay back the money you got from unemployment if Congress decides to give federal workers pay for the time they were off work.)
Do you have any other sources of cash that you can tap, such as a home equity loan? Yes, you’ll end up paying interest on whatever amount that you borrow, but it is better than getting behind in your bills. Is there a family member that might be willing to lend you money to tide you over during this emergency?
Prioritize your bills. If you want to maintain your current credit rating, you’ll have to know which companies that you owe report to the credit bureaus. Mortgage and rent payments should probably be a priority in any case—you don’t want to lose your place to live. Mortgage lenders definitely report timely and late payments to the credit bureaus, and today more rental agencies are starting to do that as well.
Many utility companies and cell phone carriers don’t report on-time payments to credit bureaus—but when you miss a payment, or they have to turn your account over to collections, they will send that late payment/non-payment information to the credit reporting agencies.
Make the minimum payments on your credit card bills. If you’re accustomed to paying off your balance each month it can be hard to pay just the minimum amount due when you know that you’ll be charged interest on the remaining balance. But the important thing now is to keep current with as many bills as possible, so you may have to make that short-term sacrifice (i.e. paying interest) until you’re receiving a steady paycheck again.
Reach out to creditors to see if they’re willing to work with you. Not every credit card or loan company will give you a break, but if you’ve been a good customer up to this point and have paid your bills on time some may be willing to try to work out repayment schedules that you can live with while you’re out of work. (They stay on top of the news, too, and know that your economic predicament should only be temporary.)
Don’t ignore your bills and hope that the companies won’t notice if you miss a payment this month. They will. It’s much better to approach the situation with an organized plan rather than just reacting when your creditors start sending you past-due notices.
Make a resolution to set up an emergency fund when this crisis is over. Life is uncertain, and while we all hope that another government shutdown can be avoided, there are no guarantees that an accident or illness won’t harm your ability to make a living. Earmark a certain amount of each paycheck and set up a separate account where you can accumulate enough money to pay nine to 12 months of bills. Yes, it will be difficult—but think of how glad you would be if you had that backup now, during these difficult economic and political times.