What to do with credit & cards while unemployed

Far too many of us have credit card debt that we have let run wild while we had a steady income. Unfortunately, now that you are unemployed you have hit a big brick wall that demands you still pay your monthly bills regardless of your income. Well, all is not quite lost yet. There are some simple steps you can take to keep yourself going and safeguard your credit.

The first thing you should do is check your credit card statement to see if they have been taking out a monthly fee for credit protection. This is the easiest way to see if you have it because most of us that signed up for credit cards either enrolled and forgot about it or never even noticed it. If you do indeed have credit protection then there is a bright ray of sunshine for you. This coverage will pay your minimum monthly payments and your credit protection fees for you until you get a job. Here are some notes to help you file and what to expect when you do:

Call the insurance company listed on your statement and tell them that you need to file a claim for credit protection and ask for the claim form.

• They will no doubt ask you when you lost your job so they know when you plan to start the claim. Then they will say something dumb like "you have to be unemployed for 30 days before we can start covering your payments so call us in a month." You will then hang up and curse them loudly for about ten minutes.
• When you call them in a month they will tell you that they can't e-mail or fax you the claim form and that you have to wait for it in snail mail. In fact the only way to expedite the filing of your claim is to fax it back to them when you fill it out. It should only take about two weeks for them to mail it to you.
• Yes, this is utterly idiotic and completely cost ineffective in today's electronics day and age but they do this for a reason. the reason is that it discourages you from filing in the first place since you have to keep making your regular payments until they get around to processing the coverage. The only carrot they can offer you is that the coverage is retroactive and will reimburse you back to the 30 day point when your claim started. The risk you run is that those late payments will end up on your credit report in the meantime and will be a complete and utter bitch to remove later.
• Be prepared to make your payments for a couple of months until the protection kicks in and to get a jump on the knuckledraggers at the insurance company don't tell them that you got laid off yesterday.Tell them that you've been out of work for a month. then when you get the form to fill out, fax it to them the day before your actual 30 days is up. That should cut the time they can delay your claim by quite a bit and get your payments made quicker.
• Also be prepared to NOT USE your credit cards while the coverage is in effect. I know it will be hard and tempting but it is better to protect your credit while you are down than destroy it and not be able to get it back when you are employed again.

DO NOT CANCEL OR PAY OFF YOUR CARDS FOR ANY REASON!!!!!!!!!!!!!!!!!!!!!!!!!!!

The reason I say this is that in this economy credit companies are extremely skittish and afraid of carrying any more bad debt than they have to. Losing one more unemployed creditor makes it easier for them and harder for you. If you close your accounts or cancel your cards, chances are great that you won't get them back for a few years. No one is extending credit to anyone these days. Even homeowners with perfect credit are being denied new loans against their equity because the banks are scared and 2009 is supposed to be a worse financial year than this one. Don't risk your credit no matter how tempted you are to live off of those cards. It isn't worth it, especially since prospective employers check your credit nowadays as part of your background information.

The best thing to do is to make this burden as easy to handle as possible and keep you in the best light creditwise. If you have enough in your severence pay or savings, I suggest that you pay down your cards so that there is a substantial distance between your established credit limit and your actual balance. It gives you a better cushion against mistakes or missed payments. If you have low limit credit cards or can afford to do it, pay them down to about a $100.00 balance. This is especially good to do if you do not have credit protection insurance. Should anything happen to you that is even worse than losing your job, you should still be able to handle them.

If you are okay with your credit card debt or if you have not filed for credit protection useage, you can call the credit card company and tell them that you want a better rate. If you handle it properly, AND YOU HAVE A GOOD TRACK RECORD WITH THEM UNTIL NOW, they will bargain with you and you could get a much lower APR which will also help you in these tough times. I wouldn't try this if you have filed for credit protection unless you haven't filed it yet and are still in your 30 day waiting period.

Check all of your outstanding credit agreements for this kind of coverage. Most loans and credit contracts offer this protection and most of us agreed to it and have completely forgotten about it. Enact every one of these claims that you possibly can on every credit account you have. They can be your lifeline in these tough times and you will come through the hard times with your credit in tact.