How Your Credit is Affected by the Government Shutdown

With the federal government’s shutdown dominating the news these days, many Americans might wonder what exactly it means for them. Some will be more affected than others, obviously, especially if they’re federal employees who are deemed to be “non-essential,” but other Americans could take a serious hit as well.

For instance, many members of the military are set to go without receiving a paycheck for as long as the shutdown lasts. The same is true for other non-essential workers, who only recently learned that they will receive the back pay they do not get during the shutdown, but that is likely little consolation to them now, as they face weeks or potentially even months without receiving a check from their jobs. Other, similar issues can arise for those slated to receive benefits from the Veterans Association, which cannot process disability payments.

Obviously, delays in any kinds of monetary payments can create major problems for many consumers. Even with the economy recovering, most people likely do not have the savings to successfully weather a month or more of not having any income at all. That means that some might have to start relying on their credit cards to cover even basic, everyday expenses like food and gas to make ends meet, and that in turn will lead to higher debt.

Owing larger balances on credit cards can both have a negative impact on your credit scores — the amount you owe when viewed as a percentage of your maximum limits makes up 30 percent of your score — but also lead to higher monthly minimums. That therefore increases the chances that you won’t be able to pay your bills at all if the shutdown lasts much longer, meaning that your score will suffer even more (payment history makes up 35 percent of your ratings). Further, you’ll be hit with late payment penalties such as higher interest rates and large fees that end up costing you more as well.

If you’re worried about the status of your credit and your normal finances as the shutdown stretches on and on, you might want to check your credit reports. Doing so might allow you to spot potentially unfair markings that are having an even more negative impact on your standing. If you spot any such entries, working with a credit repair law firm may allow you to clear them up quickly.

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