Uncle Sam’s virus has left many businesses crumbling. The financial condition of the government is also not very good. Many people have been laid off by their companies without any notice or any severance package. Many people have been forced to live on their savings or take a mortgage on their property or even Foreclosure. The implication of lockdown due to this coronavirus was very sudden and many people were not ready financially for this.
While it may seem that due to these financial conditions, the credit score would suffer drastically as many people would take mortgage or foreclosure or use up their credit card without any solid way to pay back the balances. But the effect of Uncle Sam’s virus on the Credit score is the opposite.
Below are some reasons for this opposite effect of Uncle Sam’s virus on credit score
- Government benefits:
While many people have been laid off by their companies and many businesses are shutdown Due to lockdown, but still many people are receiving unemployment benefits and weekly stimulus posts from the government. Many other factors that usually make the lenders more confident about the borrowers are also working in their favour of these people’s credit scores.
- Low expenditure in lockdown:
Because of this lockdown, many people are isolated at home. They’re not driving anywhere, traveling anywhere on buses or any public transport, they’re not eating out, and they’re not hanging out with their friends or family. All the things that would usually seem to cost money if you left the house or not being done in this lockdown. People are spending less. They are living on leftovers and eating at home. Many credit cards companies and student loan companies also have offered a three month pause period during this pandemic.
- Relaxation policies by banks and credit providers:
Everybody has the acknowledgment of the fact that the financial condition of the government as well as the public has crumbled due to this pandemic. And lockdown. So, everybody is trying to lend a helping hand to the ones who have been affected drastically by this pandemic. Anybody who is in the position to help somebody in any way is doing so. Banks and many credit providing companies are playing their role for the betterment of society by providing many relaxation policies. There are many relief programs which are helping people to get out of the debt or financial hardship at this pandemic.
Though all these things seem to be very good for the financial condition of People we have to keep in mind that all these facilities, relaxations, policies, and government funding are temporary. All these will eventually stop once this pandemic is coming to an end. After the pandemic is over, the state of employment of a person will not matter and he will have to range and employment or bring his business back to the condition before the pandemic so that he can pay off any debts, payments on credit cards or any other type of payment which was relaxed due to this pandemic. This will also affect the credit score.