There’s a good reason the possibility of a recession sends chills down personal finance experts’ backs. A decline in economic activity over several business cycles can wreak havoc on millions of people’s lives. Financially strapped employers may decide to let large numbers of workers go. The stock market can dip, causing a devaluation of investments just when investors need the money to live on when they retire. According to a July 2022 Bankrate poll, 52 percent of economists believe a recession will begin within the next 12 to 18 months.
Keeping your credit in shape will help you prepare for problems associated with a recession. Here are some strategies you can employ before and during an economic downturn.
Know your current credit scores
High credit scores will keep low-cost financial opportunities open, which will be important if you want to borrow money during a recession.
Check your credit scores now to see what they are. The FICO Score is most commonly used, and it has a scale ranging from 300 to 850, with higher numbers indicating less credit risk. Good scores begin at 670, but the closer you can get them to the top – and then keep them there – the better.
“Credit is king,” says Ramona Ortega, CEO of My Money My Future. “We use it to leverage and build assets. If your scores are low, you will pay more because the interest rate will be higher. Entering a recession with high scores will give you more access to cheaper capital when you need it. That can be a credit card, a loan or a mortgage refinance.”
Revise your budget
Now is the time to review all of your expenses, then reduce costs where you can. According to Ortega, many people spend on things they don’t care about and can easily eliminate. To safeguard your credit against a recession, you will want to free up cash for increased debt repayment and more substantial savings.
“If you’ve been spending like you don’t have a budget, stop and create one,” says Ortega. “You have to know your numbers. Look at your…
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