Illness and injuries may impact your credit score drastically. It is because every minor accident or long-term health condition requires you to relax for a month or two. The leaves may extend in case of a major health issue or sudden disability.
In that case, your income slashes, but bills continue to rise. Non-repayment increases the liabilities and interest costs. This eventually lowers your credit score. Moreover, high medical costs for low-income individuals become challenging to navigate.
If you are going through a similar situation, you need help. It is better to contact experts as soon as possible. It may help you stabilise your finances in time and seek possible solutions. Delay in doing so may make the credit damage irreversible. So, what can you do about it?
The blog discusses how illness and injuries may affect your credit score. It lists the impacts and the possible solutions to navigate the challenging path.
How does illness damage your financial well-being?
Sudden accidents and illness may damage your credit profile and overall financial well-being. Here is how:
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Loss of income
Long-term absence from work due to serious illness may lead to unemployment. You may lose your job due to not being suitable for it any longer. Your earnings drop, and so does your capacity to pay for the important bills. It could be rent, electricity, groceries, credit card payments, etc.
Even if you get temporary pay from unemployment benefits, unexpected medical bills, transportation, and tests may quickly add up.
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Increased medical costs
Medical costs like tests, consultations, and hospitalisation prove costly. Moreover, qualifying for medical insurance is generally tough in Ireland. Thus, medical costs may prove burdensome for individuals on a low income.
One may consider loans for bad credit scores to fund costly medical expenses like surgery. It is possible to finance half the cost, if not the full, given your financial and credit circumstances. It helps you go for the surgery when it’s the only way to recover quickly. Later, you can repay the dues in fixed monthly instalments.
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Debt trap
With reduced income and rising costs, one struggles to maintain or pay the dues. It is the reason most individuals rely on credit cards to meet their needs. However, not paying the previous bill limits your utilisation potential. Moreover, missed payments enter the arrears and loan defaults. It may further initiate a legal response from the creditor in the form of CCJs.
Hence, you may not use the credit cards further. Here, one jumps onto the personal loans and takes one loan to pay off other dues. In this way, the person enters the debt-trap. Failure in repaying the dues may even lead to asset seizure.
How do these incidents affect a credit record in Ireland?
Your default or pending bills get recorded in Ireland’s Central Credit Register (CCR). The authority records the defaults or pending payments if the default is over €500. Loan companies record and report the delinquencies, missed payments or credit default to CCR by conducting an affordability check for the loan (if someone needs it).
Moreover, a history of missed payments or loan defaults stays on your credit file for up to 5 years after the credit agreement ends. It may make it harder for you to get loans, qualify for credit cards or check car finance deals. It is even if your income improves.
How do missed payments affect personal life?
Missed loan payments can significantly affect your personal life. Here is how:
Difficulty in getting credit
You may struggle to qualify for a loan or credit card with missed payments in your credit report. Every loan company or creditor wants the borrower to reveal responsible payment behaviour and regular income.
Your current financial situation does not meet these criteria. Hence, you may struggle to qualify with every traditional loan company. Instead, you may qualify only with specific loan providers for bad credit scores. Here, you may fetch higher interest rates and competitive terms.
Leads to stress and anxiety
Constantly worrying about pending payments and debts fumes up anxiety levels. It leads to high blood pressure issues and significant stress. Eventually, debts may start to hamper your physical body more often. Moreover, disrupted sleep patterns affect your body’s ability to function properly.
Affects business and personal relationships
Financial issues are a common part of the discussion between a husband and wife. If you are going through a rough financial phase, hesitations are common.
Thus, no discussions affect your relationship with your partner. It may potentially lead to trust and commitment issues. Moreover, inability to afford social activities or feeling too embarrassed may lead to increased isolation and loneliness.
What can you do to bounce back from the situation?
Yes, all of this could seem a little provocative or overwhelming for you. However, you can still hold the noose and control the situation. Here is how:
Check out income protection
If you cannot work due to an injury, income protection may help. It helps you get a replacement for your income each month until you recover from the injury/illness.
You may get an income of up to 75% after the deferred period of 4weeks to 12 months. If you work for a company, you may qualify for sick pay. It may help cover the essentials for 6 months due to your absence from work.
Check the life insurance cover
Making sure that your family is being taken care of if something happens to you is the most important thing to have. It helps your family pay the pending bills and take care of children without much difficulty.
A lump sum could help your family keep its standard of living. Your loved ones may even use it to pay off some expensive debt or pay off a mortgage.
Use free and independent advice services
It is ideal to consult an expert to cover up debt issues. Here are some popular organisations to check in Ireland:
Money Advice and Budgeting Service (MABS)
It helps you get free, confidential, independent advice on all types of debt and budgeting. They can help negotiate with lenders and produce a realistic repayment plan.
Insolvency Service of Ireland (ISI) and Back On Track
If debts are unmanageable, they help people assess insolvency options such as Personal Insolvency Arrangements, Debt Settlement Arrangements, or Debt Relief Notices. These organisations help you recover from debt according to your financial situation.
Bottom line
Thus, illness and injuries may affect your ability to pay the bills on time. It affects your ability to earn a consistent income, and hence, your bills suffer.
You can identify the best ways to negotiate over the pending debt. Check the grants you may qualify for or debts that could be written off. If nothing works, take independent advice from financial experts. It may help you make the right move.
