By now, you’ve heard a lot about the COVID-19 stimulus checks, and maybe you’re even one of the millions of Americans who have already received one; the first delivery started dropping earlier this week.
There’s a lot of online chatter about who’s eligible, how much to expect and when checks might arrive, but it’s not easy to accurately nail it down. Keep reading: We’ve done the legwork for you.
Who is eligible for stimulus checks?
First things first: You must have a Social Security number to be eligible for a stimulus check. According to the IRS, more than 80% of tax filers are eligible. To see if you are one of the lucky ones, refer to your tax forms. For 2019 taxes, see line 8b on form 1040. If you’re taking advantage of the tax extension and haven’t started your taxes yet, look at line 7 on your 2018 1040 form. With that figure in mind:
- A single adult with an adjusted gross income of less than $75,000 will get a stimulus check for $1,200.
- A single filer earning above $75,000 may still get a check (but in a smaller amount) up to an adjusted gross income of $99,000. Anything over that and you’ve earned too much to be eligible.
- A head-of-household filer with an adjusted gross income of up to $112,500 is eligible for $1,200. This payment decreases on a sliding scale until reaching the salary cap of $136,500.
- Married couples filing joint returns with an adjusted gross income of less than $150,000 will get $2,400. Again, stimulus payments decrease on a sliding scale until reaching the salary cap of $198,000.
- For those claiming dependents living in the household who are 16 years old or younger, there will be payments of $500 for each.
- If you are 17 or older, and claimed by someone else as a dependent, you won’t be receiving a stimulus check.
- Eligible retirees and recipients of Social Security, Railroad Retirement, disability or veterans’ benefits have a check on the way. Taxpayers who do not earn enough money to have to file a tax return will also receive a payment.
Note that this stimulus payment is not taxable income. It’s a tax credit, so it won’t impact your 2020 tax filings next year. That’s good news.
When should you expect a stimulus check?
For those who are eligible, stimulus payments have already started arriving. If you received a tax return via direct deposit in 2018 or 2019, expect to see the stimulus payment land in the same bank account.
If you didn’t get a return, didn’t use direct deposit or you didn’t file altogether, a physical check will be sent via US mail. That will take a bit longer to reach you.
How you use your stimulus payment could affect your credit score
We know how tempting it is to blow this new found money on a new pair of shoes (bought online, of course, until this stay-at-home lockdown period is over). But don’t. Be strategic about what to do with this extra bit of cash, and remember, even if the budget’s tight, you’ll want to focus on staying out of debt and keeping your credit report in good standing. Here’s why protecting your credit report is essential.
Your credit report affects where you live:
Mortgage lenders want some assurance that you won’t default on your loan. If your credit report is questionable, it may be considered too risky to give you a mortgage – or your interest rate will be higher than you deserve.
Your credit report affects your job:
Many employers are regularly credit checks on prospective employees to determine whether they should be trusted with company finances and intellectual property. Having a less-than-stellar credit history could hurt your chances of getting hired.
Your credit report affects your purchasing power:
Good credit gives you the leverage needed to negotiate lower credit card interest rates and helps you get pre-approved for more powerful credit products. A damaged credit score limits your offers.
Your credit report affects lots of things.
Mobile service providers, auto insurers and new and used car dealers are examples of the types of companies taking a customer’s credit score into account before doing business.
Tips on spending your COVID-19 stimulus payment
If you’ve lost income due to the pandemic, we hope you’ve already socked away a small savings for just such an emergency, however unexpected. If you’re in good shape financially, add your stimulus funds to this savings stockpile.
Otherwise, we’ve shortlisted four tips on how you might want to spend your stimulus check with a focus on things that impact your credit score.
- Take care of the groceries first. For most, that would be ensuring that you have enough food in the fridge to stay healthy.
- Keep your utilities on. If your home’s gas, electric and water bills are on auto-pay, leave the stimulus payment right in your checking account, especially if your usual paycheck isn’t being direct-deposited any longer. Many utility companies nationwide have temporarily suspended service disconnection due to non-payment, while others are kicking off delayed payment plans for customers who are impacted by the virus. If that’s you, give them a call to discuss your options but don’t just flat-out stop making payments. Missing one without contacting them could result in a ding on your credit report, which could hurt your ability to make major purchases down the road when this is all over.
- Don’t miss monthly credit card payments. Little known fact: 35% of your credit score is your payment history. Being late on credit card payments will definitely hurt your credit score. You may not want to use your stimulus check to pay off your cards, but try to make the minimum payment, and aim to make them on time.
- Pay your mortgage. This is important: Don’t skip a mortgage payment. Miss a few payments and you might end up with more than just a banged-up credit report; you could end up facing foreclosure. Getting behind on your mortgage payments will hurt your credit score and make it harder to get approved for future mortgage loans. Worse, miss enough of them and it could lead your lender to foreclose on your home.
If after reading this you still think you may be unable to pay your mortgage payments on schedule, don’t despair. You can’t avoid payments altogether (without hurting your credit rating), but depending on your circumstances, there may be temporary relief available.