Others will be affected, those whose work hours depend on the spending of tourists or folks on the federal payroll, such as hospitality and restaurant workers. Unlike federal employees, they aren’t guaranteed backpay.
Lost hours or even one missed paycheck can create a crisis for workers already living on the edge.
If a government shutdown creates hardship, here’s one thing you can do: Call for help.
People often retreat and don’t communicate when they’re in crisis. But if you know you’ll struggle financially because of a shutdown, assistance may be just a phone call away.
Stay in constant contact with your landlord. This may seem obvious, and yet many tenants don’t take this route when they are in a financial bind.
You may have a merciless landlord or a merciful one. But you will never know unless you call.
Here are some options to raise during your call:
- Ask for an extension.
- Propose making a partial payment. Your rental contract may state that rent is due in full. But a shutdown is out of your control, so see if you can negotiate to pay whatever you can. If you can keep up with some of the rent, that’s less you will owe later. This might not work for a corporation, but it could for an individual landlord.
- If you paid a security deposit, ask your landlord whether that money could be applied to your rent payment. You could strike a deal to replace the security deposit once your financial situation improves.
- Ask for a payment plan for your missed rent.
- Ask for a waiver of late fees and penalties. If the shutdown doesn’t last long, you might be able to make a late payment. Given the situation, at the very least see if your landlord will suspend any penalties for the late payment.
If you can strike a deal with your landlord, be sure to get it in writing so there is no misunderstanding later.
Call your mortgage loan servicer
Call the company that manages your mortgage. Explain your situation.
In the past, lenders have offered a wide variety of help to workers affected by a shutdown.
One option is to ask for a forbearance. The debt is not forgiven, but forbearance allows a borrower experiencing financial difficulty to stop making payments.
Make sure you get information about the forbearance in writing.
And don’t worry about the impact a forbearance has on your credit history.
Once a loan enters forbearance status, a lender temporarily suspends the required payments. An account reported as being in forbearance is not viewed as a negative indicator by the FICO scoring model.
In anticipation of a shutdown, some lenders are already stepping up to help borrowers.
PenFed Credit Union announced it will offer emergency furlough relief assistance, including an interest-free loan in the amount of a customer’s net pay for members with direct deposit.
Similarly, USAA Federal Savings Bank said members employed by an affected federal agency and likely to experience paycheck disruption may be eligible to apply for a one-time, no-interest loan equal to the amount of one net paycheck, up to $6,000.
Navy Federal Credit Union is offering a paycheck assistance program, also providing an advance — up to $6,000 — for eligible members affected by a shutdown. This program is available for all active-duty service members, federal government employees, and contractors who are paid directly by the government and have direct deposit set up with their Navy account.
Navy Federal offered similar assistance in past shutdowns, including providing loans to nearly 20,000 members during the 2018-2019 lapse in funding.
If the worst happens and a shutdown lasts long enough that you miss multiple mortgage payments, here are some other options you can explore with your lender to see whether you are eligible.
- A loan modification. This would change the terms of your loan, perhaps even lowering your monthly payment. Or, your loan could be recalculated and the arrears added to the loan balance, which might make your monthly payments go up.
- A repayment plan. You would be allowed to spread out your past-due payments. The repayments would be added to your current mortgage balance.
- A loan extension. Your delinquent balance would be added to the back end of your loan. The past-due payments would effectively extend the term of your loan.
Call your credit card company
It may be hard to ask to skip a payment, but it’s better than risking a late payment.
For affected members, USAA is waiving minimum credit card payments for three months, although interest continues to accrue. Deferrals are also being offered on consumer loan payments, and for checking or savings account holders, no overdraft fees will be levied.
The biggest credit score slayer is delinquency. Your payment history accounts for 35 percent of your FICO score, which is the credit model most used by lenders.
FICO scores generally range from a low of 300 to a high of 850. FICO also creates industry-specific scores, which can range from 250 to 900.
A recent late payment can do a lot of damage to your credit score — more so than those that happened years ago, according to FICO.
And here’s something you may not realize. The higher your credit score, the greater impact of a late payment, according to Ethan Dornhelm, vice president of scores and predictive analytics at FICO.
A newly reported 30-day late payment could lower a consumer’s FICO score by more than 100 points, depending on the person’s credit profile. People with pristine credit could experience the biggest drop from a 30-day late payment, Dornhelm said.
The impact of a 30-day delinquency is likely to be more modest for consumers who already have credit blemishes, because their lower scores already reflect a riskier behavior of missed payments.
Asking for and getting a payment break can avert a ding to your credit.
If you are struggling, please call and see what help is available. The sooner, the better.