Redundancy or reduction of income

Get in touch as soon as possible

If you lose your job you are likely to be worried and very busy looking for new employment.

Don't let this stop you from sorting out any financial difficulties that may be on the horizon. It is important to act now just in case it takes longer than you would like to find a job and the delay seriously affects your finances.

No matter what the reason, if you have less money coming in, the chances are that you won't be able to pay all your bills, especially if the drop in income was sudden or unexpected or you weren't able to budget for it. Check whether or not you have redundancy insurance on which you can claim.

As soon as you know you are going to be out of work, or have to work part-time, let those lenders with whom you have credit arrangements know what has happened.

Be a responsible borrower

Never think that lenders will think less of you if you let them know your income has become less for whatever reason. This is rubbish. They will actually think more of you and recognise you as a responsible borrower if you notify them of any change in circumstances immediately and keep them regularly updated.

Perhaps the most important company to notify is your mortgage grantor. If luck is against you and you do find it difficult to pay the mortgage further down the line, you could lose your home. The way to guard against this is to let the mortgage company know as soon as possible that your circumstances have changed. They do not want to repossess your home but would much rather sort out reduced payments for a while to tide you over any difficult patch.

This applies to other lenders too, including any credit card companies, banks or finance houses with whom you have loans or other credit agreements. They do not want the expense and effort of chasing you to pay, or of ultimately taking you to court, and would prefer to find a way of letting you pay less each month, or even freezing your repayments, while you sort out your job situation.

Sort it out soon

But nobody can help you unless you tell them. The golden rule is to act as soon as you think you may have difficulties. Don't let matters deteriorate before you do anything. Write or telephone all the companies with whom you have credit arrangements, even if you think you can manage your monthly payments for a while.

Obtaining a copy of your credit reference file may help you to do this. Seeing your file will also help you understand how it could be affected if you fell into arrears with any of your credit agreements. Seek help from a money adviser if necessary (see addresses at the end).

Also remember that when you apply for a job some employers will ask for your permission to check whether you have any recent County Court Judgments or are bankrupt. If you let yourself get into financial difficulties, it may affect your chances of getting a job, particularly if you are applying for a financially sensitive position.

So protect your credit history by acting sensibly. If you lose your job and find you have less money coming in, let the lenders know.