“This year has caused immense stress and anxiety, which seem to have increased for many as the holidays approach,” said Steven Trumble, President and CEO of American Consumer Credit Counseling. “Consumers are now trying to decide how they are going to spend their money and time this holiday season. Many of the holiday cost savings suggestions financial experts have made in previous years, such as hosting potlucks or creating alternate gift giving ideas, are not viable during the pandemic.”

According to a recent survey by Credit Karma, 54 percent of consumers feel more financially stressed about the holidays than they did in 2019. The survey also found that 34 percent of consumers think they are financially unprepared for the holidays this year.

“Although some consumers may be saving by forgoing travel, not hosting large holiday parties, or canceling seasonal celebrations altogether, many are struggling to make ends meet this season,” added Trumble. “The best advice I have for consumers this holiday season is to have a spending plan in place so they know how much they can afford.”

ACCC highlights several ways consumers can reduce their holiday financial stress.

Spending plan – Make a spending plan for the holidays so you know how much you are budgeting for gifts and how that money can be realistically spent. Take an overall look at your budget considering the pandemic and see what you can responsibly afford. Be sure to factor in the cost of shipping gifts to the family you may not be able to see this year due to the pandemic.

Avoid debt – It is more important than ever that consumers avoid going into debt just to afford the holidays. Everyone knows that the economy is tight. If you can’t afford to give everyone a gift this year, your loved ones and friends will understand. Paying with cash or a debit card can also help consumers be more mindful of budgets and avoid debt.

Shop local – Small businesses and restaurants have been hit hard by COVID-19. Support businesses in your community by purchasing gift cards to local restaurants or finding unique gifts from that special small shop in the town center.

Make and stick to the gift list – Before shopping, make a list of everyone you plan on giving a gift to. It is important to prioritize this list with close family members – children, parents, and siblings first and expand from there. Don’t be afraid to cut people out you would typically send a gift to this year. For instance, many work environments are remote, so coworker gifts are less of a norm this year. Set a price limit for each recipient and note gift ideas. Be sure to follow this list when shopping and not be swayed by “deals” unless the item is on the list.

Price check – Take advantage of price matching as it could save you a few dollars. Be sure to check price matching policies at different stores to make sure you’re getting the best deal.

Shop early – Shopping early gives you time to browse for sales at various stores. It also may help you avoid holiday crowds during the pandemic.

Shop online – Help stop the spread of COVID-19 and try to do all your holiday shopping online this year. Even many local merchants are offering online or pick up shopping.

About American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit https://www.consumercredit.com/debt-resources-tools/

Low mortgage interest rates have not helped all homeowners and homebuyers equally.

Facing a demand spike, many lenders have tightened qualifications for new loans, making small mortgages more difficult to get than ever. That makes it all that much harder to get financing in some inner-city and rural areas where home prices are lower.

Lenders have long shied away from extending home loans valued at less than $100,000 for a variety of reasons, but that doesn’t mean they’re impossible to get, even now.

If you’re looking to purchase or refinance a property with a small mortgage, here are some things to know and advice on how to secure your loan.

Why are small mortgages hard to get?

Small loans can be less attractive for banks because they don’t offer as much return on investment.

Mortgages take more or less the same amount of work to process, no matter their value. So, whether a bank is extending a $50,000 loan or a $500,000 one, the costs to the lender associated with processing the application are similar — but they can charge higher fees on a more-expensive loan.

“There’s simply not enough money in the deal between closing costs, attorney’s fees” and other processing expenses, said Clete Thomas, a community outreach coordinator at American Consumer Credit Counseling.

Banks are so busy now, he added, “they’re going to prioritize what they can get to, and they’ll take the larger mortgages over the smaller ones.”

What can I do if I need a small mortgage?

Your best bet is to work with a smaller lender like a credit union or local bank.

“They’re more likely to do loans that size,” Thomas said. Borrowers should also try to “go to the institution where they have their checking and savings accounts. That can help as well.”

Banks are usually a little more generous and flexible with existing customers.

If you’re looking to refinance, a home equity line of credit (HELOC) can be a good alternative to cash-out refinancing on a small mortgage.

“Banks are much more likely to do a smaller home equity line of credit,” Thomas said. “The downside to those are, it’s an adjustable rate and after 10 years, the credit line freezes and then you have to pay it back in a matter of 10 to 15 years.”

Do I have alternatives if I can’t get a mortgage?

Options like rent-to-own or owner financing can be helpful if you’re struggling to get a mortgage, but these arrangements can be complicated and wind up costing the borrower more in the long run.

“I would always advise somebody to hire an attorney before they sign that contract and make sure they read the fine print,” Thomas said.

Rent-to-own is when a company purchases the house for you, and then acts as your landlord until you save up enough to buy it from them. Part of your monthly rent will usually go toward an eventual down payment on the property. For tenants, these deals can be risky because they may wind up forfeiting that money if they don’t eventually buy the house.

Owner financing, as the name suggests, is when you deal directly with the seller for financing, rather than going through a bank. It can involve less paperwork than a traditional mortgage, but often comes with a higher interest rate.

Thomas said if you qualify for a mortgage, you’re usually better off finding a traditional lender who will work with you, rather than going with one of these other options.

How does credit fit in?

Credit affects your ability to get a mortgage generally — and your interest rate — but your score won’t make a huge difference in terms of how much mortgage you’ll qualify for.

“Either you qualify or you don’t,” Thomas said. “If you have low credit scores, FICO scores, however you want to word it, step one is to pull your credit report and take a look at whatever is causing the problem.”

Check out Bankrate’s guide for more detailed advice on how to improve your credit.

If you’re struggling to qualify for a mortgage, boosting your credit score will make it easier, no matter what size loan you’re looking to take out.

Bottom line

Amid high demand for mortgages, lenders can be pickier about which applications they accept. That favors higher-dollar borrowers, and means it may be more difficult than ever to get a small loan.

There are some ways to get a small mortgage now, but it may take some extra legwork to find a suitable lender.

If you need a mortgage for less than $100,000 and have some flexibility in your timeline, waiting may be the best idea.

Mortgage rates are expected to start rising again in the coming months, which should translate to less demand for new loans.

“As the demand slows, these will be, not necessarily more attractive to the bank, but the bank still has to lend money,” Thomas said. “Certainly, if the market slows down, these smaller mortgages would be easier to obtain. Not easy, but less difficult.”

American consumer debt has reached $14.35 trillion, including mortgages, car loans, credit cards and student loans, according to the New York Federal Reserve. Some Americans are unable to manage the thousands of dollars of debt that they have, forcing them to explore other options rather than trying to chip away at an ever-growing mountain.

Debt consolidation is one of these options. Debt consolidation loans are used to pay off multiple credit cards and combine those monthly payments into one, usually with a lower interest rate. Although it sounds like an ideal solution, there are pros and cons of debt consolidation.

What is debt consolidation?

Debt consolidation is the process of combining two or more debts into a single larger debt. This step is often taken by consumers who are burdened with a significant amount of high-interest debt.

“It’s often used to combine credit card debts, auto loans, student loans, medical debt or other types of loans into a new loan,” says Katie Ross, education and development manager for American Consumer Credit Counseling. “Then the borrower only has to pay one monthly payment instead of a separate payment for each debt.”

In addition to simplifying your finances, debt consolidation ideally allows for obtaining more favorable loan terms, such as a more competitive interest rate.

Why should I be interested? 

There are several potential benefits associated with debt consolidation. Taking this step allows you to combine multiple debts into a single monthly payment, simplifying your finances and making life easier. Consolidation can also result in a lower interest rate on your debt, which will have long-term benefits.

“If interest rates are lowered and the consumer pays off the debt in the same or less time than they would have been able to before consolidation, they will save money,” says Michael Sullivan, personal financial consultant for Take Charge America.

Debt consolidation is generally a good idea for those with a good credit score, since a good credit score will let you qualify for the most competitive interest rates on the combined debts.

5 key benefits of debt consolidation

Debt consolidation is often the best way for people to get out of debt. Here are some of the main benefits.

1. Repay debt sooner

Taking out a debt consolidation loan may help put you on a faster track to total payoff, especially if you have significant credit card debt. Credit cards don’t have a set timeline for completely paying off a balance. A consolidation loan, on the other hand, has fixed payments every month with a clear beginning and end to the loan.

Takeaway: Repaying your debt faster means you may pay less interest overall. In addition, the quicker your debt is paid off, the sooner you can start putting more money toward other goals, such as an emergency or retirement fund.

2. Simplify finances

When you consolidate debt, you no longer have to worry about multiple due dates each month because you only have one payment. Furthermore, the payment is the same amount each month, so you know exactly how much money to set aside.

Takeaway: Debt consolidation can turn two or three payments into a single payment. This can simplify budgeting and create fewer opportunities to miss payments.

3. Lower interest rates

The average credit card interest rate is around 16.03 percent. Meanwhile, personal loans typically average around 11.88 percent. Of course, rates vary depending on your credit score, the loan amount and term length, but you’re likely to get a lower interest rate with a debt consolidation loan than what you’re currently paying on your credit card.

Takeaway: Debt consolidation loans for consumers who have good credit typically have significantly lower interest rates than the average credit card.

4. Have a fixed repayment schedule

Use a personal loan to pay off your debt, and you’ll know exactly how much is due each month and when your very last payment will be. Make only the minimum with a high interest credit card, and it could be years before you pay it off in full.

Takeaway: By having a fixed repayment schedule, your payment and interest rate remain the same for the length of the loan, there’s no unexpected fluctuation in your monthly debt payment.

5. Boost credit

While a debt consolidation loan may initially lower your credit score slightly, since you’ll have to go through a hard credit inquiry, a debt consolidation loan may help improve it over time, because you’ll be more likely to make on-time payments. Your payment history accounts for 35 percent of your credit score, so paying a single monthly bill when it’s due should significantly raise your score.

Additionally, if any of your old debt was credit card-related and you keep your cards open, you’ll have both a better credit utilization ratio and a stronger history with credit. Amounts owed counts for 30 percent of your credit score, while the length of your credit history accounts for 15 percent. These two categories could lower your score should you choose to close your cards after paying them off. Keep them open to help your credit score.

Takeaway: Consolidating debt can ultimately improve your credit score, particularly if you make on-time payments on the loan, as payment history is the most important factor contributing to the calculation of your score.

3 key drawbacks of debt consolidation

There are also some downsides to debt consolidation that you should consider before taking out a loan.

1. It won’t solve financial problems on its own

Consolidating debt does not guarantee that you won’t go into debt again. If you have a history of living outside of your means, you might do so again once you feel free of debt. To help avoid this, make yourself a realistic budget and stick to it. You should also start building an emergency fund that can be used to pay for financial surprises so you don’t have to rely on credit cards.

“It’s critical when considering consolidation to identify what caused the debt in the first place and make adjustments to budget and spending habits in order to prevent the situation from reoccurring,” says Bossler.

Takeaway: Consolidation can help pay off debt, but it will not eliminate the financial habits that got you into trouble in the first place, such as overspending or failing to set aside money for emergencies. You can prevent more debt from accumulating by laying the groundwork for better financial behavior.

2. There may be some upfront costs

Some debt consolidation loans come with fees. These may include:

• Loan origination fees.
• Balance transfer fees.
• Closing costs.
• Annual fees.

Before taking out a debt consolidation loan, ask about any and all fees, including those for late payments and early repayment.

Takeaway: Do you research carefully and read the fine print when considering debt consolidation plans to make sure that you understand the full cost of the loan you’re considering.

3. You may pay a higher rate

It’s possible that your debt consolidation loan could come at a higher rate than what you currently pay. This could happen for a variety of reasons, including your current credit score.

“Consumers consolidating debt get an interest rate based on their credit rating. The more challenged the consumer, the higher the cost of credit,” says Sullivan.

Additional reasons you might pay more in interest include the loan amount and the loan term. By extending your loan term, your monthly payment could be less, but you may end up paying more in interest in the long run.

As you consider debt consolidation, weigh your immediate needs with your long-term goals to find the best personal solution.

Takeaway: Consolidation does not always end up reducing the interest rate on your debt, particularly if your credit score is less than ideal.

Final considerations

Before signing onto a debt consolidation offer, review all of your current monthly minimum payments and the expected length of time to repay the debt and compare that to the time and expense associated with a consolidation plan. If you’d like to see how a debt consolidation loan could affect your finances, you can always use a debt consolidation calculator.

And remember, when considering consolidation, it’s important to take the time to reflect on what caused the mountain of debt in the first place and address those root issues. Consolidation can feel like an immediate relief, but ultimately, it may not resolve the problem if there are issues such as overspending or a budget shortfall that remain unaddressed.

The bottom line

Debt consolidation is a good option for people who need to simplify their monthly budget or those with good credit who can qualify for a low interest rate. However, if you’re interested in a debt consolidation, also ensure that you have a plan to pay off your new loan and avoid racking up new debt in the process.

Under the CARES Act, certain rules were changed so that you could dip into your retirement savings to cover living expenses. For many, this was a lifeline.

To date, nearly one quarter of American workers have borrowed from their retirement plans, according to American Consumer Credit Counseling.

“Those who take a coronavirus-related distribution (CRD), which can be up to $100,000,” according to ACCC, “are not subject to the 10% excise tax that otherwise applies to distributions made before an individual reaches 59.5, and can pay back the loan within three years. The option proved to be a useful solution among some workers, and in June, the IRS expanded the categories of individuals eligible to borrow.”

While the extra money may have helped to pay some bills, any borrowed money needs to be paid back within a certain time, or you will have to pay taxes on the withdrawals.

And you also need to keep in mind that replacing the money is essential to maintain a robust retirement savings plan. You’ll need to get back on track — if you can.

If you’re in recovery mode, that is, working and saving again, then it’s time to refocus on your retirement goals. The need for planning has never been more important.

“Most [retirement] plan participants still have the benefits of time and continuous paychecks—both of which disappear in retirement,” writes Neal Ringquist of the Retirement Clearinghouse.

“That’s why retirement savings should be used as a last resort for meeting emergency expenses after all other alternatives, such as government assistance and borrowing, have been exhausted.”

(Boston, MA) – November 19, 2020 – The COVID-19 pandemic started as a health emergency and quickly became a financial threat as well. The pandemic has shown there is a lack of financial education among consumers. National non-profit American Consumer Credit Counseling (ACCC) says while financial literacy cannot help to predict when threats to consumers’ financial health will happen, financial education is still important in economic recovery.

“COVID-19 has made it apparent that there is a lack of financial literacy among consumers,” said Steve Trumble, President and CEO of American Consumer Credit Counseling. “Being prepared is vital when it comes to recovering from an unexpected financial hardship.”

According to the Council for Economic Education’s 2020 survey, 21 states require all high school students to take a personal finance class upon graduating. This is an increase of four states since 2018. The survey also found that five states still do not include personal finance education in their course standards for graduates.

“Financial education never stops. Consumers need to continue their financial education to ensure they know how to manage and protect their money,” added Trumble. “Financial education prepares people to face situations we are experiencing now and will also play a huge role in the recovery.”

The U.S. Department of Labor found that the unemployment rate is at 6.9 percent as of October 2020, which translates to 11.1 million. Although these numbers have fallen over the last couple of months, they are still almost twice the rates seen in February 2020 when 3.5 percent were unemployed. According to ACCC’s Third Quarter Financial Health Index, only 22 percent of those polled said they are “very confident” in their income security six months from now – a decline from 26 percent in June. A total of 10 percent said they have no confidence in their income security six months from now.

Financial strategies that are vital in protecting personal finances include:

1. Budgeting – A budget is the cornerstone of responsible financial planning and allows consumers to see exactly how much money they have and where it is going each month. A budget can help consumers find ways to save money and plan for the future. Filling out a budgeting worksheet is a good start in creating a budget.
2. Emergency Fund – An emergency fund is the best defense and readiness tool for unforeseen circumstances, such as a pandemic or job loss which many are experiencing now. When starting and building an emergency fund, consumers should aim to put five to ten percent of each paycheck into a separate emergency fund account. Cut back on unnecessary expenses, such as eating out or buying coffee, and put that money towards an emergency fund.
3. Credit – Credit allows consumers to purchase items now and pay for them later. It is nice to have but knowing how to manage and maintain good credit can be challenging without knowing how it works. A consumer’s success in managing their credit is reflected in their credit report and score. ACCC has put together several informative articles on understanding credit reports, credit report dispute letters and more.

About American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit http://www.consumercredit.com/financial-education.aspx

How long should it take to pay off student loans?

It typically takes between 10 and 30 years to pay off student loans, but the time frame varies by individual and is impacted by several factors, including the loan interest rate, the total balance owed, the borrower’s annual income and the repayment plan.

“If your total student loan debt at graduation is less than your annual income, you should be able to afford to repay your student loans in ten years or less,” says student loan expert Mark Kantrowitz, publisher and vice president of research of Savingforcollege.com. “The average student loan repayment term, however, is 16 years.”

Types of repayment plans

The choice of repayment plan has the greatest influence on how long it will take you to eliminate student loan debt, Kantrowitz says.

For most federal student loans, the standard repayment plan is 10 years, though it’s possible to select a longer repayment horizon. Options include extended repayment, graduated repayment and income-driven repayment.

Extended repayment offers repayment terms of up to 25 years, while the graduated repayment plan offers timelines of 10 to 30 years, with payments beginning low and increasing every two years. This option is designed for borrowers whose income may be low now but is likely to increase regularly.

The repayment timeline for income-driven plans is generally 20 to 25 years, depending on the specific option you chose. There are several income-driven repayment choices, including Revised Pay as You Earn (REPAYE), Pay as You Earn (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR).

Why pay off student loans fast?

Paying off your student loans quickly can be beneficial to your financial health in many ways. By doing so, you’ll be able to save for retirement sooner, improve your credit score and avoid interest accrual.

“Paying off your student loans faster also means you’ll pay less in interest, so if you want to save money, it’s a good idea to pay off your student loans sooner rather than later,” says Madison Block of American Consumer Credit Counseling.

This is especially true now, as interest rates on federal student loans are waived through Dec. 31, 2020. This is a great chance to make progress on paying down the principal on your student loans without having any interest accrue.

If you’ve lost income and wonder what you’ll do when COVID-19 relief runs out – especially as stimulus talks remain stalled – here’s how you can get through this nightmare.

Are Covid-19 Relief Programs Vanishing?

Millions of people remain out of work as some creditors have begun to pull back on COVID-19 financial relief programs. At the start of the pandemic, there was a lot of buzz about help from creditors.

“The timing of those programs was excellent compared to the response of many of the same creditors during the economic crisis of 2008-09,” says Bruce McClary, senior vice president of communications for the National Foundation for Credit Counseling.

Fast-forward to November, and things have changed slightly, he says. Even if programs introduced during the COVID-19 shutdowns are no longer available, most creditors will offer help in other ways.

“That doesn’t mean that options are off the table,” McClary says. “There is a benefit in calling your creditor, having a discussion about your circumstances and exploring solutions to keep it from getting worse.”

In fact, about a quarter of consumers in a September survey by the nonprofit American Consumer Credit Counseling said they asked their creditors for COVID-19 financial relief. They requested deferred or reduced payments, or lowered interest rates; 1 in 5 requests was denied.

Can You Still Find Covid-19 Relief for Credits Cards and Loans?

Some creditors and lenders still have programs for customers struggling to pay their bills during the coronavirus crisis. Whether you need help managing credit cards or loans, you can find help. Below are some of the relief programs available.

Credit Cards

• Wells Fargo is offering deferred payments for two billing cycles. Contact customer service to discuss additional options if you continue to face challenges after the deferment period.
• Citi waives late fees and defers minimum payments on credit cards, allowing you to pay less than the minimum. You’ll need to sign in to your online account to request COVID-19 support.
• If you’re a Chase customer, you may be able to defer a payment on your personal or business credit card. Cardholders are encouraged to enroll online in the COVID-19 Payment Assistance Program.
• USAA members can access special payment assistance programs for credit cards, consumer loans, mortgages and home equity lines of credit.
• American Express can temporarily lower monthly payments and interest rates, as well as waive future late payment fees, for those who qualify.
• Discover has relief options, and cardholders should call customer service to talk about them.

Mortgages

The coronavirus rescue package passed in March puts two protections in place if you have a home loan backed by Fannie Mae or Freddie Mac, or a government agency. The first of these measures stipulates that your lender or loan servicer may not foreclose on you until at least Dec. 31, 2020.

Second, “Homeowners facing financial difficulties due to COVID-19 can get forbearance for up to a year,” says Madison Block, marketing communications and programs associate at American Consumer Credit Counseling.

Contact your loan servicer to request this forbearance. You will only need to claim a pandemic-related financial hardship, and your account will not accumulate extra fees, penalties or interest charges.

These relief measures have remained in place without issue. “For those individuals who have mortgages that are federally backed and protected under the CARES Act, I have not heard any issues,” McClary says.

Student Loans

You can skip federal student loan payments and pay no interest through the end of 2020, but those protections don’t apply to private student loans. The outcome of the 2020 election could determine what happens next: Will student loan debt be forgiven?

In the meantime, some states have negotiated relief agreements with lenders and loan servicers to offer borrowers at least three months of forbearance, waive late payment fees and more.

The clock is ticking, however, if you enrolled in a separate relief program early in the pandemic. You’ll need to contact your loan servicer to learn about your options.

What Can You Do if You’re Buried in Bills?

When forbearance isn’t available, you can ask creditors about hardship programs. These vary by lender, McClary says.

You can get through a rough patch by being proactive: Start a conversation with your credit card issuers and lenders about how to qualify for temporary relief programs.

Creditors may offer:

• A late fee waiver. If you happen to miss a payment because you stumbled a bit, call the creditor right away and see if the late fee can be removed. If you’ve been a good customer, there’s a good chance the creditor will extend you that courtesy.
• A temporary interest rate reduction. This could help take some of the sting out of carrying a balance or facing more credit card expenses because of lost income.
• A temporary minimum payment reduction. If your minimum payment has become tough to afford, some creditors may be willing to take a little less for a short time.

Note that none of these solutions are intended for the long term. “They are designed for people who are dealing with a minor setback where they know they are going to get back on their feet in two to three months,” McClary says.

Who Do You Call if You Need Longer-term Debt Solutions?

If you think you’ll be facing long-term or severe financial hardship, you need to communicate that to your creditors, McClary says.

“It’s always better to be able to operate out in the open than have them guess and take actions that are not helpful to you,” he says.

If going through this process with multiple creditors is too overwhelming, you might want to contact a nonprofit credit counseling agency, such as the National Foundation for Credit Counseling or American Consumer Credit Counseling.

“Calling a nonprofit credit counseling agency can be a good option for borrowers who are struggling and not receiving enough help from their creditors,” Block says.

A certified credit counselor can help you come up with a budget and a plan to pay off your debt. The counselor may suggest enrolling in a debt management program.

Will Covid-19 Payment Relief Hurt Your Credit Score?

Consumers in COVID-related forbearance or deferred payment plans will not see drops in their credit scores from FICO or VantageScore. Lenders must notify the three major credit bureaus – Equifax, Experian and TransUnion – if you’ve been placed in one of these plans.

Normally, when you negotiate the terms of a lending product in a way that causes you to pay less than agreed, your credit score may suffer, McClary says.

You can double-check that your accounts are being reported properly with free weekly access to online credit reports through April 2021 at AnnualCreditReport.com.

But if you have to choose between staying afloat financially or preserving your credit score, McClary says, “Take care of the necessities like food and shelter rather than obsessing about your credit score.” The good news is there are ways to restore your score after you make it through this crisis, he adds.

Are Diy Options for Managing Bills During Covid-19 Helpful?

A balance transfer credit card or a personal loan could help you manage monthly debt payments, with a few caveats.

Balance transfer credit cards with introductory no-interest periods – some for up to 20 months – can help you pay down your balance without finance charges. You’ll need to remain diligent and disciplined about clearing those balances off the books, though, before the 0% interest rate runs out.

This plan has a couple of downsides. The first is that you may not be eligible for a balance transfer credit card, McClary says.

“If you’re already missing payments, it’s going to be hard to qualify for the best balance transfer offers,” he says.

Second, some of these cards charge a balance transfer fee of 3% to 5% of the amount being transferred, Block says.

That’s cheaper than racking up months of interest charges, but you’ll need to manage your account carefully. If you don’t pay off your balance during the interest-free period or you miss a payment and are charged a penalty rate, you will owe interest on top of the balance transfer fee.

A personal loan is an alternative to a balance transfer credit card, but it’s also not without risks.

“A personal loan is not the best option for someone who may not be able to pay it back, especially in such uncertain economic times,” Block says.

Missing payments can seriously hurt your credit and make getting loans and new lines of credit harder, she adds.

The bottom line is reducing your interest rate or your monthly payments can be helpful, but you have to know what you’re getting into and have a solid repayment plan.

Protect Yourself From Credit Default

As lawmakers fail to pass another coronavirus relief package, you will need to ask for what you need from creditors. Try to reach out before you start to miss payments and put your credit at risk.

“Communicating with your lenders is the best way to ensure that you can get some type of payment plan worked out to keep your account in good standing, even if you have ongoing financial hardships,” Block says.

If you ask for something and the answer is no, don’t be afraid to try again, McClary says. “It’s OK to escalate and ask to talk to a manager instead of the representative,” he says.

If you’re struggling to make headway, consider turning to a nonprofit credit counseling agency to advocate on your behalf.

“Don’t rule out possibilities,” McClary says. “There’s always the chance that if you keep trying, you’ll get the result you’re looking for. And when it comes to debt relief, any progress is good progress.”

“Many people went from planning for the future to planning for right now, as the pandemic brought on so many unexpected challenges,” says Andrea Williams, a wealth management advisor with Northwestern Mutual. According to a Northwestern Mutual consumer survey conducted in April, Williams notes, 64 percent of respondents said COVID-19 had a significant impact on their daily lives and 68 percent shared they were concerned about the U.S. economy.

Obviously, these changes may leave you feeling stressed, but several financial advisors offered up some tips to help weather this year (and the next) regardless of your financial situation.

Learn to Adapt

According to Williams, the past few months have revealed the importance of being able to adapt to life’s unexpected challenges. “While the best way to adapt during this time might look different for each person, anyone who’s trying to make this shift and figure out what’s next for their finances, should consider certain questions.”

She believes these are four questions to start with:

• What options do I have for quickly accessing cash?
• How can I protect my income during these uncertain times?
• What types of loans and financing am I eligible for?
• Looking ahead, how can I financially prepare for what’s next?

Don’t Make Emotionally Driven Decisions

The ability to make sound financial decisions requires both knowledge and thoughtful consideration. “However, people often make decisions that are dictated heavily by emotions, rather than finding the right balance between rational and emotional thought,” Williams says. If you’re stressing over a financial decision or the current state of your investments, she has this simple advice. “Step away and take a deep breath—I’ve seen how this can help you make more calculated choices and avoid reactionary decisions.”

If you’re thinking about yanking your money out of the market, it may not be wise to pull out just because of market volatility or a temporary setback. “History has shown that the markets and investments have typically bounced back over time,” Williams explains. “Of course, past performance is not a predictor of future success, but it is information that should be taken into account.”

Josh Simpson, a financial adviser with Lake Advisory Group in Lady Lake, Fla., says he’s seen a dramatic shift since the beginning of the year. “Prior to the pandemic, and mostly because we were experiencing the longest bull market in history, people were less concerned with risk and finding ways to limit the amount that they took on as they got older or even while they were still working.”

However, across all age groups, Simpson says the focus is now on creating safe, consistent income in retirement that isn’t solely dependent on the stock market.  “The number of people that I have spoken with who want to move money into CDs and bonds has increased dramatically since February of this year.” But those options can also be problematic. “With rates so low, they are really limited in the safe options that exist and can keep up with inflation.”

And yet, Simpson notes that there are investment options that can remove the market risk from the equation. “That is where working with a financial advisor who is a fiduciary and is looking out for your best interest comes in handy.”

Focus on Your Budget

Financial uncertainty increases the need to know where your money is going—and making  changes when you can. Simpson says this need isn’t as great for retirees because they’re on a fixed income and understand the importance of budgeting. “However, the pandemic has awakened a lot of people to the realization that they may not be getting a paycheck next month because something out of their control happens.”

And now more than ever, he recommends learning how to live within—or below—your means and saving as much money as you can. Even if your job appears to be relatively safe, it might not be untouchable. “You might not get laid off, but it is possible to get hours cut, salary reduced, or some other type of reduced income,” warns Brandon Renfro, a financial advisor and assistant professor of finance at East Texas Baptist University in Marshall, Texas. “Including some margin of safety in your budget lets you react in a more subtle way.” Using a free budget spreadsheet, you might be surprised to see where your money is going.

Check in With Your Creditors

If your income has been reduced or eliminated and you’re on unemployment or living on your savings, prioritize what’s most important. According to Katie Ross, education and development manager at American Consumer Credit Counseling, the necessities are groceries, rent/mortgage payments, and medicine. “Credit card debt repayment may have to be put on the back burner until consumers who are out of work or have had their hours cut start making more money again,” she says.

However, if you can’t afford to make your minimum payments every month, she recommends calling your creditors immediately to work out a payment plan. “Creditors might temporarily lower interest rates or minimum payments as a form of relief.”

Storm-proof Your Credit

Did you know that your credit score can be negatively impacted even if you’re making timely payments?  Ross says that some credit card companies are reducing consumer’s credit limits. And once that happens, your credit utilization ratio takes a hit. For example, if you have a $5,000 limit, and you’ve charged $2,000, your credit utilization ratio is 40 percent. However, if the credit company lowers your credit limit to $3,000, you’re utilizing two-thirds of your credit, and this will lower your credit score.

She recommends the following checklist to storm-proof your credit as much as possible:

• At least once a month, review all credit card, credit line, and consumer loan statements.
• Ask about credit limits and if your lender or credit card issuer plans to lower your limits.
• Use any extra cash left over each month (even small amounts) to pay down the largest balance or the debt with highest interest.
• Obtain your credit report (for free) and use free services to monitor your credit scores each month.

If you’re new to the workforce, saving for retirement might not be a priority, but according to our financial advisors, it should be. “Quite a few employers have cut their matching contributions to retirement plans.” And to make sure that you don’t derail your retirement savings, Renfro advises factoring the missed match in your budget, if you’re able to do so. “For example, if you had a 5 percent match but your employer cut it, that means you need to save an additional 5 percent to keep from falling behind.”

Don’t Forget About Life Insurance

COVID-19 has been a grim reminder to obtain life insurance. “Our study revealed that the pandemic has prompted Americans to reconsider their views of life insurance’s role as part of a holistic financial plan, with nearly four in 10 (or 37 percent) saying they now see an increased importance for owning it,” says Chantel Bonneau, a San Diego-based wealth management advisor for Northwestern Mutual.” In fact, she says that many advisers have observed an increase in discussions with clients regarding life and disability insurance.

Consider Refinancing Your Mortgage

Interest rates are still low, and depending on your current rate, you may benefit from refinancing your mortgage. “While it can take time to receive approval, refinancing can help lower your monthly payments for the long term,” Williams explains. However, be sure to weigh all of the pros and cons of refinancing, since this might not be the best option if you’re closing to paying off the mortgage, or if you don’t qualify for a really good rate.

The ACCC Financial Health Index for the third quarter of 2020 found that 23 percent of respondents report they have asked credit card companies for some type of relief, such as payment deferral, reduced payments, or lowered interest rates. Of that group, approximately 20 percent of those who requested relief were denied, according to ACCC.

The findings emerge following ACCC’s second-quarter Financial Health Index released in July, where 25 percent of those surveyed said they had borrowed from their 401(k) accounts or other retirement savings.

“The pandemic is not going away, and American consumers have recognized that and are doing what’s necessary to keep their household budgets out of a crisis,” said Steve Trumble, President and CEO of American Consumer Credit Counseling. “Good communication with banks, credit card issuers, and other lenders is probably the best strategy if you find yourself falling behind on payments. The earlier you reach out for assistance, the better.”

More than 215,000 Americans have died from COVID-19 during the pandemic, which first descended on the U.S. in March. Public health officials are warning of a new surge of infections as winter approaches. Millions have lost jobs, and entire economic sectors have shut down or slowed dramatically. However, there have been some promising signs. The unemployment rate in September fell to 7.9 percent from a high of 14.7 percent, and it beat market estimates by 0.3 percent.

ACCC’s Q3 poll of 441 Americans surveyed respondents aged 25-65 with incomes of $100,000 or less. It was conducted in September.

The number of respondents who reported having zero confidence in the U.S. economy fell back to 16 percent in the September survey, from the 23 percent who reported zero confidence in June. But income security remains an issue for many Americans. Only 22 percent of those polled said they are “very confident” in their income security six months from now – a decline from 26 percent in June. A total of 10 percent said they have no confidence in their income security six months from now.

The ACCC Financial Health Index poll has a margin of error of plus-or-minus 5 percent.

The U.S. economy added 1.4 million jobs in August, and the unemployment rate fell in both August and September. According to Pew Research Center, half of adults who say they lost their job during COVID-19 are still unemployed.

Overall, household debt continues to be an issue. Close to 45 percent of those surveyed for the Q3 Financial Health Index said their debt-to-income ratios were either somewhat unhealthy or very unhealthy. And 38 percent said they were either not so confident or not at all confident in their ability to reduce debt by at least 10 percent over the next six months.

Many major credit card companies are offering financial relief programs. For example, American Express offers cardholders a short-term repayment plan for 12 months, in which minimum payments and interest rates are lowered. Bank of America cardholders can call and request payment deferrals. Chase Bank stated customers could delay up to three payments on their credit cards, though interest will continue to accrue.

“The initial shock and surprise of this historically devastating event may have worn off a bit or dissipated. But managing finances during an extended economic crisis is something all Americans should be prepared for,” Trumble said. “Credit card issuers and other lenders are being flexible with those who are hardest hit, but you won’t get assistance if you don’t ask for it. This is no time for consumers to be uninformed about their options.”

Financial counselors at ACCC continue to provide callers with budget counseling and assistance with creditors while providing further assistance through ConsumerCredit.com and the ACCC Talking Cents blog. Counselors are also directing clients to resources such as the Ready.gov section on financial preparedness and the downloadable EFFAK (Emergency Financial First Aid Kit) guide.

About American Consumer Credit Counseling

American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management through credit counseling, debt management, bankruptcy counseling, housing counseling, student loan counseling, and financial education concerning debt solutions. To help consumers reach their goal of debt relief, ACCC provides a range of free consumer personal finance resources on a variety of topics including budgeting, credit and debt management, student loan assistance, youth and money, homeownership, identity theft, senior living, and retirement. Consumers can use ACCC’s worksheets, videos, calculators, and blog articles to make the best possible decisions regarding their financial future. ACCC holds an A+ rating with the Better Business Bureau and is a member of the National Foundation for Credit Counseling® (NFCC®). For more information or to access free financial education resources, log on to ConsumerCredit.com or visit https://www.consumercredit.com/debt-resources-tools/

Katie Bossler, quality assurance specialist at financial nonprofit GreenPath, says that adding an authorized user is favorable because building credit takes time. According to Experian, a person needs “to have an open and active account for three to six months before a credit score can be calculated.” Getting a high score takes even longer.

When a person becomes an authorized user on an account, it’s a shortcut. Authorized users not only get purchasing power but are also shared on payment history, utilization rate and age — all of which can influence their credit score. They don’t have to start from scratch; they can skip the line.

“For anyone who’s new to credit, understanding how to responsibly use a card is such a great thing, and this can be a good opportunity to help that person along,” Bossler says.

This is beneficial for young people, who may not have credit cards, a car loan or really much money at all to speak of. But there are some pretty serious risks involved.

For the authorized user, it could go south if the account holder starts financially flaking. If they randomly begin missing payments or carrying a huge balance, it could end up hurting the user’s score.

The situation may turn sour if the user goes wild and buys a bunch of expensive items on the account holder’s card, too. It’s not a joint account; you don’t share the burden. The debt belongs to the account holder even if the transaction doesn’t.

“He’s not left holding the bill,” Bossler says. “He’s not responsible for paying it back.”

The No. 1 factor in a credit score is on-time payments, but another potentially hairy area is the utilization rate. Cardholders are generally advised to keep their credit utilization ratio, which measures credit used in relation to credit available, under 30%.

American Consumer Credit Counseling’s Madison Block points out that, based solely on the numbers, it’s easier for two people to spend more than one. She gave an example: Say your credit limit is $1,000, so you want to put no more than $300 on your card. You’ve been comfortable with that budget all this time, but then you add a user. If you continue spending at your normal level and then the user also spends $300, the utilization rate is going to spike. And that means your credit score is likely going to fall.

“You have to agree ahead of time with that authorized user, that ‘Hey, each of us can only spend $150 a month,’” Block says.

That sort of agreement plays into another consideration around authorized users. You should only add people you wholly trust to your account.

Bossler recommends having a sit-down with a sibling/relative/friend before putting them on my card. You should hammer out some ground rules about how much they’re allowed to buy, how they’re going to pay you back and what you’ll do if you end up carrying a balance. From there, proceed with caution.

“We’re blending family and money,” she says. “If things don’t go well, it can be a strain on the relationship.”

The bottom line: Adding an authorized user on your card can give someone an advantage, but you should be careful. You’ll need to trust them to not run up debt, and they’ll need to trust you to make payments on time.

You’re ultimately responsible for what happens, though there are ways to keep tabs on the authorized user. For example, you can pull your credit report (right now you can get one a week for free) and set up text alerts for any spending that happens on the account.

There is a failsafe, too: If it doesn’t work out, you can always remove the authorized user.

“You remain in control,” Bossler says. “You can add them on but also take them off.”