The outbreak of Covid-19 virus has left millions of people struggling with their finances.
Research by Credit Karma suggests that more than three million Brits have already missed regular payments due to coronavirus disruption, with a further five million expecting to face the same difficulties in the near future.
One of the measures taken by the Government to ease this pressure was to offer mortgage holidays to those struggling with repayments.
Following the announcement in Mid-March, 1.8 million homeowners have taken a mortgage holiday. Whilst this has undoubtedly relived some of the pressure, for many cost-cutting will need to go much further.
Credit Karma’s seven tips
Don’t just cancel direct debits – the agreed break you have taken from your mortgage payments won’t count against your credit score, but cancelling other direct debits or credit card payments without first speaking to your bank or lender will have an impact on your records.
Maintaining your direct debits is a good way of showing lenders you are responsible with your money. Whereas cancelling a scheduled payment will register as a missed payment and can significantly impact your credit score – even if it’s only by a day or two.
Re-evaluate your finances – if you have more time to reflect on your current situation, take the opportunity to reconsider your spending habits and available budget.
If your financial planning needs reassessing – from credit card repayments to the size of your weekly shop – then look to make changes. There are lots of free apps out there to help you set and reach new goals.
Cancel or change subscriptions provisionally – We know Netflix and Spotify might appear at the top of our list of pleasures at the moment, but it’s a good idea to review your subscriptions and consider cancelling any you don’t desperately need or use at the moment.
Try and categorise your subscriptions by type, and limit to one of each, which might force you into some hard decisions (Netflix or Disney+?) but it will help keep entertainment outgoings to a more manageable rate.
If cancelling is not an option, try finding a non-premium or cheaper membership deal, which might also save you a couple of pounds a month.
Shop around for free and discounted trials too – just be sure to remember to cancel before the payment date if you don’t wish to continue with the membership. Some memberships allow multiple users – so check where you can share subscriptions and save a little.
Check your credit report regularly – checking your credit report can be a one-stop-shop for getting an excellent overview of your financial situation so that you can either reassure yourself that you’re doing all you can to reduce debt in a manageable way – or guide you to devise a money-saving strategy.
When you check your credit report at CreditKarma.co.uk you get a snapshot of all your outstanding credit, such as mobile phone, energy bills, as well as credit cards, loans and mortgages – so you can see how much you owe and where any problems might arise.
Moreover, with Credit Karma you also get alerts if any new credit agreements are set up in your name, which is ideal if you are worried about becoming a victim of fraud.
Don’t be tempted by buy now pay later – payment services like Klarna might be something you’re tempted to try to tide you over in times like these. While they seem like an easy way to split or delay payments on those non-essential items – especially when your cash is limited – this can make it much easier for you to splash out on items you can’t afford.
In worst case scenarios, being over reliant on such services can result in users racking up unaffordable amounts of debt that risk damaging financial wellbeing and permanently scarring credit scores.
Switch energy providers – If you’re one of the people who never switch providers, now might be the time to take the plunge. Switching websites and apps have developed quick and easy ways of identifying better deals for you, as well as making the switching process as convenient and hassle-free as possible.
So whether it’s your gas and electric, or your monthly phone bill, taking the time to consider your options could save you more than you think.
Try and boost your savings – even if it might seem impossible to save at this time, try and put away any leftover money at the end of the month into a savings account (or even a piggy bank!). Every penny counts and having them in a safe place will buy you that little extra wiggle room if you’re feeling the pinch in future months.
If you’re worried about debt or struggling financially, seek impartial advice from charities such as StepChange.
