SAFE June 24, 2020 at 12:42 PM

How to protect your credit during challenging times

When you’ve experienced a loss of income, you may be tempted to use credit to pay for your expenses. However, taking that shortcut today may affect your finances far into your future.

It’s important to know how to navigate debt reduction and payment options when your resources are stretched without putting yourself deeper into debt. Some ways to do that include:

  • Facing your debt
  • Resisting the urge to spend money you don’t have
  • Creating a realistic budget and financial plan
  • Decreasing your expenses

SAFE financial experts are here to help you with insights about handling your finances during a crisis. The following information is from our free webinar, “Navigating your Debt in Challenging Times.” You can register for this and other helpful webinars at

What is debt?

Most of us think of debt as what we owe on loans and credit cards. But debt also includes any financial obligation you have, including utility payments, memberships, and subscriptions.

Track your debt

In challenging times, it’s especially important that you have a solid handle on your finances. You’re going to need to know your income and your expenses, and debt is a major component of your expenses. While some debt is recurring, such as utility payments, there are other debts that you can work to pay off and get them out of your life.

For these debts, such as credit cards and personal loans, you need to come up with a repayment plan.

  • Step 1: Take inventory of your debt. Add up all you owe on credit cards, personal loans, health care bills, etc.
  • Step 2: Add up your net income.
  • Step 3: Subtract your debt from your income. Use that figure to create a comfortable repayment plan that includes weekly, bi-weekly, or monthly payments. One good practice is to make payments whenever you get paid. If you get paid more than once a month, that may help you pay off your debt faster and help you avoid any late payment fees.

What if you come up short?

One of the worst feelings in the world is to have more month than money. If your current income isn’t enough to cover your expenses, you’re going to either have to cut expenses or find a way to make extra money. Some suggestions are to ask your employer if you can work overtime; find a side job; turn your hobby into an income; or sell unwanted items through online marketplaces. The goal is to find ways to bridge that gap without going further into debt.

Snowball vs. avalanche debt reduction methods

When you have multiple sources of debt, there are two main ways to tackle it: the snowball and the avalanche methods. Each has its benefits, and it’s best to follow whichever one you know you can stick with.

Snowball: In the snowball method, you pay off your lowest amount of debt first. You then commit the money you paid on that debt to your next smallest debt.

  • What it means to you: You get a sense of satisfaction of paying off debts and having fewer bills each month.
  • What it means to your financial well-being: Your credit score may improve as you reduce the number of accounts with balances.

Avalanche: In the avalanche method, you pay off one of your larger balances first, then apply those funds to accounts with smaller balances.

  • What it means to you: While it may take longer, you will get a great sense of satisfaction that a high balance account is no longer hanging over your head. And, you will be able to apply money you used on that account to clear lower-balance accounts more quickly afterward.
  • What it means to your financial well-being; You may free up a big chunk of cash each month. Also, your credit score may improve as you reduce your balance to less than a third of your account’s credit limit.

Debt consolidation

You can also look into consolidating your debt into one loan that may have a lower interest rate than some of your other accounts. When exploring this option, be sure you only consider loans from reputable financial institutions, preferably one you already do business with. This will help you avoid scams or programs that may not be a right fit for you.

Refinance options

For larger debts like home and vehicle loans, you may want to consider whether you can refinance for a better rate. This may help free up extra cash each month. And when shopping around for options, be sure to include credit unions like SAFE Credit Union. As a nonprofit financial institutions, SAFE offers lower rates on vehicle and mortgage refinances than big banks.*

Explore payment options

In times of crises like the COVID0-19 pandemic, many companies work with their customers and members to help them pay their bills or even put off payments for a few months to help them get through a difficult time. You can learn about SAFE’s options for our members here. It’s essential, however, that you contact the companies directly to explore your options. Never ignore your bills. That could harm your credit rating and relationships with the companies you do business with.

  • Financial institutions: Many financial institutions, and in particular credit unions like SAFE Credit Union, are offering deferred payments on certain loans, including vehicle and some personal loans, as well as mortgages and credit cards. If you need some relief for a few months, contact the financial institutions you have loans with to see whether you can put off payments or set up partial payments for a specific period. Keep in mind, however, that interest will continue to accrue and your payoff date may change when you defer payments.
  • Utility companies: In light of the financial impact of the COVID-19 pandemic, a number of utility companies in the Greater Sacramento area are stopping service turn-offs and other retaliatory actions for non-payment. But that doesn’t mean you should completely ignore those bills. Contact utility companies to see about deferred payments and programs that let you spread out payments over time. They also may offer special rates for people with lower incomes.

It’s important to keep your debt load manageable, especially in uncertain times. It will help bring you peace of mind, increase your financial freedom, and reduce stress.

If you want to learn more about how to get a handle on your finances and how SAFE can help you, set up a time to talk with one of our experts.

Set up an appointment at a branch.

Call us at (800) SEE-SAFE

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To learn more and register for our free webinars, visit


*All loans subject to approval.




SAFE Credit Union has served its members with integrity, exceptional service, innovative products, and progressive technology since 1940.