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How a Hurricane Can Blow Away Your Credit Score

With Hurricane Florence pummeling the east coast, for many, priorities are being shifted.  When you think of a hurricane, you think of the dangers of high-speed winds, rising water levels, and wide spread homelessness.  What you may not think of is the effect a hurricane can have on your credit score.  While this certainly takes a back seat to safety, it should when you are preparing for the storm.

The data used in this post are from a report released in 2017 by the Kansas City Fed, “Financial Vulnerability and Personal Finance Outcomes of Natural Disasters“authored by Kelly Edmiston.

Who is at risk?

People with relatively high credit card utilization and unpaid bills are at risk of losing more than 80 points on the credit score if they are directly hit by a Category 1 hurricane.  In 2007, Hurricane Humberto slammed into the coast of Texas.  In areas of coastal Texas where:

  • 1% of people had unpaid bills, the average drop in credit score was 16.2%.
  • 5% of people had unpaid bills, the average drop was 81.2 points.
  • People had 10% credit card utilization, the average drop was 17.9 points.
  • People had 40% credit card utilization, the average drop was 71.2 points.

The average drop in credit score for all areas affected by Hurricane Humberto was 46.4 points.

How Can You Avoid or Reduce Your Risk?

The author of the report, Kelly Edmiston, addresses one of the main reasons people find themselves unprepared in the path of a hurricane.  He says, “The problem’s not so much that they’re making mistakes in preparing for a disaster, but they underestimate the likelihood that they’ll be affected.”  Suggestions for preparing include:

  • Paying your bills before the hurricane arrives. You may not be able to pay online, by phone, or by mail if you wait.
  • Notifying your credit card companies that you have to evacuate. This could get you an extension if you are late and they will know not to decline your charges if you relocate to a relatively unusual place.
  • Getting cash before the storm arrives. Many places may not be able to accept credit or debit cards and this can prevent you from over-utilizing your cards.

It can be extremely difficult to prepare for a natural disaster.  Sometimes, even being prepared is not enough.  If your credit has been affected by a hurricane, unexpected job loss, or for any other reason, you may need help getting back on track.  If you want creditors to stop calling day and night, contact Elias Dsouza.  He has the skills and experience to get you back on track.

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