Partnering with Families to Manage Credit and Debt

Families may need to access credit or adjust their debt management strategies during an emergency or natural disaster. Head Start and Early Head Start family services staff and home visitors can partner with families to:

Manage credit and debt during emergencies
Manage credit and debt for long-term goals
Track progress and celebrate successes

Manage Credit and Debt During Emergencies

Emergencies and natural disasters may impact a person’s credit due to changes in income or other circumstances. These are times for families to address their immediate financial needs and protect their future financial goals.

Credit. Credit is an agreement between a lender and a borrower. The borrower promises to repay the lender by a certain date with interest. Interest is a fee charged for borrowing money.
Debt. Debt is the amount owed to a lender. Some common forms of debt are home mortgages, car loans, personal loans, and credit card balances.
- It is up to each individual to decide when going into debt is worthwhile and when debt may cause them stress and financial worry.
Protecting credit during emergencies. Many lenders have announced procedures to help borrowers who are impacted by the current pandemic. Visit the Consumer Financial Protection Bureau (CFPB) website to learn more.
- Some lenders are willing to provide loan extensions, a reduction in interest rates, and temporary lower or paused payments (forbearance).
- Some lenders may choose to not report late payments to credit reporting agencies or will waive late fees due to the COVID-19 pandemic.
- Encourage families to contact their lenders to explain their situation and ask what procedures they have in place to help borrowers. Remind families to get confirmation of any agreements in writing and to keep a record of these conversations, including dates, times, and employee ID numbers or names.
Free financial coaching. You can refer families to credit counselors or financial coaches who can help them make important financial decisions that work best for them.
- The Association for Financial Counseling & Planning Education (AFCPE) is offering free COVID-19 virtual financial counseling and coaching. Families can work with an AFCPE-certified professional to address their unique situation and needs. Visit the Coordinated Assistance Network to learn more.
- For more information, see the Economic Mobility Toolkit for Head Start and Early Head Start, Key Topic 1: Accessing Financial Education, Coaching, and Counseling.

Manage Credit and Debt for Long-Term Goals

Credit reports. Banks and companies that lend money also report information to credit bureaus about people’s personal payment history and how they have used credit in the past. This information creates a person’s credit history, credit report, and credit score. A person’s credit report and credit score play an important role in their future financial opportunities.
- A credit report and credit score record and measure a person’s financial reliability. They can carry a lot of weight in many circumstances, including getting a credit card, buying a house, or even applying for a job.
- Consumers are entitled to one free credit report per year from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can help families access their credit report and review the information on each report.
- Families can go to AnnualCreditReport.com to request a free credit report. Currently, Annual Credit Report is offering more frequent free reports to help families manage their credit history during the COVID-19 pandemic.
Credit score. Credit bureaus, also called credit reporting agencies, use information on a person’s credit report and a formula to create a person’s three-digit credit score. When a person applies for credit, a financial lender uses this score to help decide whether to offer the person a loan and how much interest they should be charged.
- Typically, having a low credit score makes it harder for a person to get a new loan or a low interest rate on a loan.
- A credit score is a continually changing number because the information in a person’s credit history changes as they make financial decisions.
Managing debt. You can partner with families to create a budget for repaying debt. Remind families that it is important to repay debt on time. This helps them avoid additional fees that make payments much more expensive and protects their credit history.
- Families can consider when and how much money they receive each month from a paycheck, financial aid, unemployment insurance, or other sources.
- They also can figure out how much money they have left each month to pay down a loan after paying for housing, food, and other necessities.
- Share tools like the Make a Budget Worksheet from the Federal Trade Commission website that families can use to create a budget.
- Visit the CFPB website for additional tools and resources on managing debt. You can also review Managing Debt from Consumer.gov for additional guidance.
Learn more. To learn more about credit and debt, see Credit, Loans, and Debt from Consumer.gov and the Economic Mobility Toolkit for Head Start and Early Head Start, Key Topic 3: Building Credit and Managing Debt.