If you lose your job suddenly, you may find yourself in a financial crisis, especially if you don’t have much savings to fall back on.
Many people end up relying on credit cards in between jobs and find themselves saddled with debt.
If you can’t pay your credit card bills on time or have to max out your card, you will find yourself with bad credit. Worst of all, many employers check credit when screening potential new employees.
Use these tips to avoid bad credit when losing a job.
1. Look into unemployment benefits.
Some people who lose their jobs are eligible for unemployment benefits, which can help you stay afloat as you search for new work.
Qualifications vary from state to state, but one rule that applies across the board is you must be unemployed through no fault of your own. This means you will not qualify for unemployment if you quit or were fired for misconduct.
These benefits are generally only for people who were laid off.
2. Rely on savings first.
Hopefully before you lost your job, you saved and built an emergency fund. Now is the time to use that savings.
You should not start putting everyday expenses on your credit card unless you absolutely have no savings and can’t make money until you land a new full-time job.
“Don’t hesitate to ask your friends
or family members for help.”
3. Look for income opportunities.
If it’s taking a while to find a new job, you may want to look for short-term opportunities to put money in your pocket rather than on your credit card. This may mean babysitting, lawn work, odd jobs for neighbors, freelance writing or temp work.
If you have computer skills, look for short-term gigs on Elance.com. If you prefer hands-on work, you can find ads on Craigslist from people looking for help moving, babysitting and more.
These short-term gigs will help you rely less on credit cards during your time between jobs so you can avoid bad credit.
4. Start living frugally.
When you had a regular income, you may have been somewhat flexible in how you spent your disposable income. When you are jobless, it’s time to live on a tight budget and save every spare penny because you don’t know how long you will be out of work.
This also is a time to cancel unnecessary recurring expenses like Netflix or gym memberships. These can resume once you have a regular paycheck.
This is the time to cook instead of eat out. It’s also a time to stop going out for drinks, as the mark-up on alcohol is extremely high. Have friends over for dinner or drinks instead.
5. Ask your creditors for leniency.
If you have realized you won’t be able to pay your bills, especially your credit card, on time, don’t just sit back and pay your bills late.
Proactively call your creditors, utility company, mortgage company and any other places that send you bills to inform them you have lost your job. Ask if you can set up an alternative payment plan since you will have limited income.
They may permit smaller or late payments with no penalty but only if you call and ask.
6. Don’t be afraid to ask for help.
Just like you may need to ask your creditors for leniency in this time of need, don’t hesitate to ask your friends or family members for help.
Maybe you need them to watch your kids more often as you go on job interviews, or perhaps you need some hand-me-down clothes so you don’t have to buy new ones. If you are part of a religious community, ask if they have any resources to help you during this challenging time.
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