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How losing your job can impact your credit

Losing your job
It's not something you want to think about, let alone plan for. But below are tips to help you prepare for the possibility of losing your job. They can help you to avoid ending up in unrecoverable debt.

Determine Where You Stand Financially
Now is the time to determine how long you could get by on your savings in case you lose your job. Create a net worth statement. A net worth statement is a snapshot of your current financial situation and is also useful for other purposes, such as preparing for major expenses. To create a net worth statement, simply write down everything you own (savings, real estate, valuable possessions, etc.) and subtract everything you owe from the total.

Find out about Severance Pay
Do employees who are laid off from your company receive severance pay? Knowing how much you'd receive if laid off will help you to calculate how much you need to set aside in savings in case you lose your job. Also find out if you'd be allowed to continue your health insurance benefits if you lose your job.

Set Aside an Emergency Fund
To stay afloat financially in case you lose your job, and to maintain your good credit history, try to keep at least three to six months' worth of salary set aside as an emergency fund.

Contact Your Lenders
If you do lose your job, contact your credit card companies and other lenders and let them know. They'll appreciate your effort and responsibility. Try to arrange reduced payments during this difficult time. Also, resist the urge to use your credit cards unless absolutely necessary.