Did you know your credit can be impacted by climate change?

If you experience a severe weather event — like flooding, wildfires, or a hurricane — you might need to:

• Evacuate your home
• Arrange short-term lodging
• Repair or replace damaged property
• Cover insurance deductibles

On top of this, you’d still be expected to keep up with your normal expenses, like rent or mortgage payments, utility bills, childcare costs, and groceries.

Having credit to cover these expenses can be helpful. Depending on the types of expenses incurred by the extreme weather event, you can use your credit card to help cover these costs. However, the additional costs caused by severe weather can also impact your ability to make payments on an existing credit balance.

When a weather disaster occurs, people living on low-to-moderate incomes are more likely to experience negative effects on their financial health. In fact, SaverLife found that 16% of homeowners and 26% of renters made late payments on debt obligations like credit card payments when they were impacted by a severe weather event.

Here are 5 steps you can take to protect your credit after a natural disaster, while still making sure you have the support you need to cover expenses.

1) Evaluate Your Situation

One of the first things you can do to protect your credit after a natural disaster is to evaluate your financial situation. While it’s important to check on your property and collect personal items (when it’s safe to do so), it’s also important to take stock of your budget and savings. 

While a natural disaster can create unforeseen expenses, you still need to keep up with your regular bills. If you’ve been displaced from your home, there may be services you won’t be using until you’re back home, like internet or even streaming platforms. Canceling or pausing these services can free up funds to cover disaster-related expenses.

Next, evaluate your current credit card debt. You may not be able to pay off your entire balance if your income has been impacted by the disaster. But making the minimum payment is important because your payment history accounts for 35% of your FICO credit score.

2) Contact Your Creditors and Lenders

In the aftermath of a natural disaster, it might not seem important, but reaching out to your lenders and creditors should be on the list of things to do. This is especially true if you’re facing financial hardship due to loss of income or have large, unexpected bills. 

Your creditors and lenders might have hardship programs that can help if you can’t make payments immediately. But many of these programs aren’t available if you’ve already missed a payment. So, to protect your credit and give yourself some breathing room, it’s good to get in touch with your creditors and lenders as quickly as possible. 

If you lost any credit cards during the natural disaster, alert your credit card companies so they can cancel the cards. This will protect your credit in the event someone finds your card and tries to use it. It will also ensure that new cards are issued so that you can access your credit while you rebuild from the disaster. 

3) Request a Copy of Your Credit Report

As you’re working to protect your credit after a natural disaster, get a copy of your credit report. You can request a free copy once a year from each of the three credit reporting bureaus at www.annualcreditreport.com. 

Your credit report shows information about your loans, credit accounts, and other accounts (both open and closed). It also shows your payment history, bankruptcy information, collections details, and information regarding any judgments or lawsuits against you. 

Checking your credit report after a natural disaster allows you to do a couple of things to protect your credit.

1. First, it lets you check in with all the accounts and loans that you have. This way, you can double-check that inactive accounts show up as “closed” on your credit report. This report can also be helpful information to have on hand when reaching out to your creditors and lenders to let them know if you’re experiencing financial hardship. 

Second, it lets you catch errors quickly. If you spot something wrong, you can take the necessary steps to correct it. 

4) Consider Credit Monitoring or Freezing Your Credit

If you’re concerned that your identity might have been compromised because of a natural disaster, you can protect your credit by monitoring or freezing it. 

You should consider signing up for credit monitoring if you need to open a new credit account or take on a new loan soon. Credit monitoring services will track your usage and credit behavior, and it will alert you if they suspect fraud. Often you have to pay for these services, but some credit card companies may offer them for free or at a reduced fee. 

On the other hand, you should consider freezing your credit if you don’t plan to open a new credit card or take out a loan soon.

When you freeze your credit, creditors can’t pull up your credit report. This means no new accounts can be opened in your name. Plus, you can freeze and unfreeze your credit at any time. So, if you decide to open a new card or loan, you can lift the freeze permanently or temporarily to open the new account. 

To freeze your credit, contact each of the credit bureaus, Experian, Equifax, and Transunion separately and request the freeze. It’s free to request a credit freeze, and it doesn’t affect your credit score. 

5) Make a Plan to Pay Down Debt

Finally, as you move past the natural disaster and work to reestablish yourself, make a plan to pay down your debt. 

Start by making a list of all your debts. Include who you owe, how much you owe, your minimum payment, and the interest rate. Getting organized will give you a true sense of your debt. It will also help you make a repayment plan. 

Once you know how much you owe, look at your budget to see if there’s extra money to put toward your debt. If there is, you can use a method like the debt snowball to organize your debts from lowest balance to highest balance, excluding your mortgage.

Make the minimum payment on each of your debts, then apply the extra you’ve found to your smallest debt. Do this until it’s paid off. Then shift the extra to your next smallest debt. Continue to do this until your debt is paid off. 

Making a plan to pay off your debt will help protect your credit because credit usage comprises 30% of your credit score. So, eliminating your credit card debt, or at least reducing the amount you owe, will help increase your score and protect your credit.

Final Thoughts  

Natural disasters can have a profound effect on our lives, damaging homes, infrastructure, and in some cases, the towns we live in and the services we rely on. When you’re dealing with this stress, it can be easy to ignore your finances and tell yourself you’ll worry about them later. But if you take these five steps, you can protect your credit and financial health after a natural disaster.

Has your financial health been impacted by climate change? SaverLife wants to hear from you. Complete this brief survey to connect with one of our team members.