The COVID-19 pandemic has harmed millions of people in the US and globally. For many, it has also impacted their mental health.
Founder of R&D Financial Coaching, Rebecca Brooks, says COVID has made much more aware of their financial situation. Stress and uncertainty have caused many people to fear debt, pay off as much as possible, and increase their emergency fund balances.
Whatever the cause, financial strain can affect your credit score. Paying late, racking up high balances, or opening multiple credit cards quickly due to a cash crunch can harm your credit score.
Not being able to borrow money in Utah when needed can cause financial stress or lead to bad financial decisions. Don’t worry, because Green Day Online – Utah sugessts loans for people with bad credit, so you can get the money you need. Understanding the link between economic and mental health is essential.
How does bad credit affect mental health?
Many factors, including low income, can cause bad credit, says Kristin Lobenstein, a financial coach with Jewish Family Service Greater Dallas.
“When people can’t pay their bills, they turn to credit cards and payday loans,” Lobenstein says. “And if something breaks, like a car or a phone, credit cards are the only way to survive.”
Having too much debt or not paying on time might damage credit ratings. Financial mismanagement is not always linked to income.
Payment history accounts for 35% of your FICO credit score. Paying your credit cards, loans, and other obligations late (or not at all) might hurt your score. Credit usage accounts for 30% of your FICO score, so maintaining significant balances or maxing out cards may hurt your score.
Lobenstein argues not having a budget leads to overspending. Similarly, not tracking your spending can damage your credit if you are in debt. But keep in mind that adverse credit might be caused by circumstances beyond your control.
Say you become ill or wounded and can’t work or get fired. Without a large emergency fund, you may risk falling behind on credit card payments and other bills. Late or missing payments still harm credit.
Regardless of the cause, bad credit can negatively impact your finances. Bad credit can make it difficult to:
- Obtain new credit cards or loans.
- Get a room or utilities in your name
- Purchase a house
- Qualify for low-cost loans
- Get hired for jobs
- Bad credit might hinder your financial progress. That might be harmful to your mental health if you feel pessimistic about your finances.
Debt and mental health are linked. According to the Mental Health Policy Institute, 46% of debtors suffer mental health issues. And 86 percent of individuals with mental health issues claimed that money was a factor in their problems.
Spending money as a coping skill can be detrimental to mental and financial health.
“If you think what you’re buying will make you feel better, you’re more likely to prioritize spending or incur debt,” says Aja Evans, a licensed mental health counselor. Learning healthy coping skills that don’t involve spending money may help reduce the risk of debt.
How do finances affect your mental health?
The pandemic caused anxiety and depression in 4 out of 10 Americans, the Kaiser Family Foundation reports. In 2019, 1 in 10 Americans felt fear or despair.
So, why the rise?
Fear of the virus and becoming ill is part of the problem. But job loss, solitude, and financial hardship are all impacting Americans’ mental health.
Abandoning the pandemic, work-related stress may wreak damage. A WHO research estimated that 264 million individuals suffer from depression and anxiety, costing $1 trillion in lost productivity. The research mentioned workplace pressures such as:
- Rigid working hours
- Unsafe working conditions
- Poor management and communication
- Limited decision-making power or involvement
- Tough jobs
- Employees’ lack of support
An excessive workload and workplace bullying or harassment may contribute to a stressful work environment. You may feel compelled to labor to earn a living but at the price of your health.
Lastly, relational stress. Half of the subjects reported pandemic-related depression in one research at Indiana University. And 50% said their spouse had used psychological violence (such as shouting and threatening) against them. Couples regularly argue about money so the epidemic may be leading to more frequent fights and financial stress.
Those difficulties must be addressed to improve financial health.
According to Lobenstein, financially secure people do better at work and engage with others. “Partners who discuss money openly are happier.”
Having a family history of mental illness might affect your mental and financial well-being. Having a family member with mental health issues may raise your chance of acquiring a mental health condition. That increases your chance of economic hardship, leading to poor credit.
How to build credit and alleviate financial stress
Simply put, poor credit may hinder your progress and financial objectives. Bad credit can make life more difficult financially and mentally, but it doesn’t have to be that way.
Adding up your debts might be a good start. You can create a realistic debt repayment plan once you know how much you owe, who you owe it to, and the interest rate.
It’s OK to seek support if this phase seems overwhelming. A non-profit credit counselor can assess your debt and recommend solutions. Making a monthly budget and enrolling in a debt management plan could help. Here are some options:
You could also look into ways to rebuild credit over time. Opening a bad credit card can help you build a positive payment history. That could help your credit score if you pay on time and keep your balance low.
Doing something is preferable to doing nothing.
“Learning what you need to do and simply taking action will reduce your stress,” Brooks says.
The two generally go hand in hand. Debt or lost income may have heightened your worry due to the COVID-19 epidemic. Recognizing how financial issues affect your mental health and vice versa might help you discover a strategy to improve.