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  • Managing a coronavirus budget? Beware of overlooked debt hiding in plain sight


    For anyone above the age of 18, protecting your credit score whilst navigating the coronavirus health and financial upheaval is challenging. We know about those large repayment obligations like mortgages and rent, utilities, car payments. But what about the smaller sources of debt that could have easily slipped through the cracks in this chaotic time?

    The first step to getting in front of budgeting during this economic downturn is to identify all your creditors, then to understand exactly what impacts your credit score. In this two-part article, we outline various sources of debt that you may have forgotten about (the last payment on a credit card?) and give suggestions for how to avoid taking a hit during the Covid-19 lockdown. 

    Credit – in simple words – is the ability to borrow money, requiring you to pay it back later. Whilst we’re all busy working out a revised coronavirus budget (likely based on lower income), here are some sources of credit that you may have simply forgotten to take into account when planning monthly spending:

    Debts you may have forgotten:

    Retail credit cards – Retail credit cards offer discounts and other perks when you use the card to make purchases from sponsoring merchants. These cards use banks and/or card networks payment rails such as Visa, American Express, or Mastercard. Some are co-branded, allowing customers to use the card with other retailers. If you have a retail card but haven’t been back to that particular store recently (perhaps due to coronavirus), your credit card might have slipped your mind!

    Overdrafts – An overdraft is a type of credit whereby your bank allows you to withdraw more than your account balance. Overdrafts are generally pre-agreed to a set amount depending on your account history and needs. Just like any other credit, there are very often interest charges on the amount of your overdraft. As a matter of good budgeting, check your account balances often to ensure that you’re still within your limits (also, as a means to countering fraud attempts).

    Mobile phones – When you buy a mobile phone on a contract from your operator and reimburse the cost month by month, this is a credit. In this instance, you likely pay a small amount upfront for your phone followed by monthly instalments for a set period of time (12 to 24 months, for example). It is easy to forget about your mobile phone debt as payments are likely bundled with your data and airtime phone contract.

    Traffic fines – Can an unpaid parking fine really affect my credit score? The short answer is yes, technically. Although the road from the initial parking penalty to mark on your credit score is a long one. However, whether it is a penalty issued by the police or a fine for overstaying your welcome in a supermarket parking lot, the best course of action is to pay the debt as quickly as possible – don’t ignore a traffic fine.

    Now what?

    Now that you have identified your overlooked debt, what comes next? In Part II, we offer suggestions for ensuring your credit standing doesn’t suffer during the coronavirus downturn.

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