The content of this blog was updated on April 19, 2022 to include new information since it was first published on March 19, 2020.
You might be concerned about what will happen to your credit reports and scores if you are having financial difficulties. During the COVID-19 (coronavirus) pandemic, you can manage and safeguard your credit using the information below.
Reach out to your lender or creditor
Numerous creditors and lenders provide credit reporting agencies, also known as consumer reporting companies or credit bureaus, with information about your payment history. This includes mortgage servicers, credit card providers, cell phone service providers, landlords, and other businesses that you owe money to and that provide information on accounts that are being collected.
It’s critical to get in touch with your lender or creditor if you are having trouble making payments on your debts. Numerous creditors and lenders have disclosed proactive actions to assist borrowers impacted by COVID-19. Forbearance and credit reporting requirements under the Coronavirus Aid, Relief, and Economic Security (CARES) Act may apply to your circumstance.
Your creditors or lenders may be prepared—and in some cases are required—to offer forbearance, loan extensions, a decrease in interest rates, and/or other repayment flexibility in the event of another natural disaster or emergency. Due to the pandemic, some lenders are also promising not to report late payments to credit reporting agencies or waiving late fees for borrowers. Lenders are required by the CARES Act to report your accounts as current in certain circumstances.
You can speak with your lender or creditor to learn more about the options and programs that are offered. These programs are sometimes called “hardship” or “relief programs. These programs might let you sign a contract promising to:
The CARES Act calls these agreements “accommodations.”
On a copy of your bill for your mortgage, credit card, auto loan, or other loan, look for a customer service number to contact your lender. The pandemic is causing a high call volume for some lenders, so there may be a long wait. You can also check the website of your lender to see if it offers any resources that can be helpful to you, electronic communication channels, or online applications for hardship programs.
Be sure to have your account number and payment information on hand when getting in touch with your lenders. Prepare to explain your employment and financial circumstances, as well as the amount you can afford to pay in light of your income, expenses, and assets. Have a list of questions prepared in advance. Before you sign an agreement, you want to be certain that you are completely comfortable with the terms.
Here are some key questions to ask:
For some types of mortgages, there are unique forbearance or relief programs. Visit the page on mortgage and housing assistance to learn more.
Use our checklist:
How will my credit be affected?
There could be a variety of effects on your credit reports and scores depending on whether you were successful in reaching a compromise or making an accommodation when you spoke with your lender. The data in your credit report is used to determine your credit scores. There are credit scores for various loan products and purposes. Many factors go into computing your credit scores. Find out more about how credit reports and credit scores are related.
Two companies, FICO and VantageScore, among others, create scoring models that analyze your credit and generate a credit score. You can find out more information of how these companies are responding to the COVID-19 pandemic and treating forbearances and deferrals from FICO and VantageScore . It is important to keep in mind that different lenders use different credit scores including scores they build and manage themselves.
Companies that report your payment information to credit reporting agencies are subject to additional requirements under the CARES Act. If you are impacted by the coronavirus pandemic and your lender grants you a reprieve to postpone a payment, make partial payments, forgo a delinquency, modify a loan, or receive other relief, these requirements apply.
If your lender does reach a settlement or provide you with a concession:
Whether you are current or already delinquent at the time this agreement is made determines how your lenders will report your account to credit reporting agencies under the CARES Act. Only if you are making any payments stipulated by the agreement are you subject to these reporting requirements.
Only agreements made between January 31, 2020 and the later of the following two dates are subject to this CARES Act requirement:
If your lender does NOT give you an accommodation:
Your credit report may be impacted if your lender decides not to reach an agreement with you even though they are not required to do so. Your lender will likely notify you that your account is now past due if you are unable to make a payment or the minimum amount due and are unable to find a workaround.
If you want, you can ask your lender to add a “special comment” to your account noting that the pandemic-related account was affected by a national emergency. Your credit scores won’t be impacted by the comment, and your loan will still be listed as past due. However, it might be taken into account by a potential lender, employer, or landlord when evaluating your application for a loan, a job, or housing. The special comment could assist a lender or other report user in understanding that although you typically make your payments, you were unable to do so for a while due to the pandemic. Additionally, the special comment may only appear on your account for a brief period of time, such as when a declared national emergency is in effect. The special comment information is completely and permanently removed from your credit report when the lender stops providing it. There won’t be any evidence that a special note was ever added to your credit report.
Additionally, you can add a “permanent comment” to your credit report stating that the pandemic has had a negative impact on you. Your credit score will not be impacted by this comment, and the delinquent loan will still be reflected there. Even after the national emergency is over, the comment will stay in your file, and a potential landlord, employer, or lender might take it into consideration.
The CARES Act mandates requirements for credit reporting and payment suspension for some federal student loans. Any payment that has been suspended must be reported as if it were a regularly scheduled payment made by the borrower during the time that the Department of Education has suspended payments on federal student loans.
How do I get a copy of my credit report?
Right now, it’s easier than ever to check your credit report more often. That’s because everyone is eligible to get free weekly online credit reports from the three nationwide credit reporting agencies: Equifax, Experian, and Transunion. To get your free reports, go to AnnualCreditReport.com . The credit reporting agencies are making these reports free until December 31, 2022.
Equifax, TransUnion, and Experian, the three national credit reporting agencies, are already required to give you a free credit report upon request once every twelve months. Make sure to double-check your reports for mistakes and challenge any false information.
In addition to your free annual credit reports and weekly online credit reports until December 31, 2022, all U S. Consumers have the right to six free credit reports from Equifax every year until December 2026. You can access these free reports online at AnnualCreditReport. com or get a “myEquifax” account at equifax. com/personal/credit-report-services/free-credit-reports/ or call Equifax at 866-349-5191.
How often should I check my credit reports after talking to my lender?
You should check your credit reports to ensure that the agreement or accommodation you made with your lender is accurately reflected after you’ve reached an agreement or made an accommodation. Make sure they didn’t report it as delinquent or a missed payment, for instance, if your lender permitted you to postpone one month’s payment. You should check your credit reports frequently, especially if you are or will be in the market for credit or if credit reporting information will be used to make a decision about you for a loan, job, or housing. It might take a month or more for the changes from your lender to appear on your credit reports. Check your credit reports to ensure they are accurate after a month or two.
You might want to check out additional reports as well, such as those that track your bank and checking account history, phone, utility, and rental payment history, among other things. Depending on your unique situation, the CFPB has a list of consumer reporting companies where you can learn more about which reports might be important to you.
Obtaining a free copy of your credit scores may also be possible. To find out how you can access one of your credit scores for free, look at the most recent list of businesses and organizations that claimed to provide free credit scores.
How can I get errors in my credit report fixed?
You can check your credit reports for errors and dispute any inaccurate information if your credit reports are not accurate or accurately reflect your agreements with your lenders. Use the CFPB’s step-by-step guide to raise a dispute with the credit reporting agency and the business that furnished the inaccurate information if you discover it on your credit reports. ” After you send your dispute, check your report again. Consider delaying your check to see if the errors have been fixed for a month or two. Check your reports with each of the three major national credit reporting agencies. Only one credit reporting agency may receive information from your lender or creditor, so by checking all three, you can be sure that it has been reported accurately. Additionally, you will be aware of which credit reporting agency to contact if you need to contest inaccurate information.
You can request that a brief summary of the dispute be added to your file and included in future reports if your dispute with the credit reporting agency is not resolved. Additionally, you can contact the CFPB at any time by visiting consumerfinance.gov. gov/complaint. Share this.
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FAQ
Does a loan modification hurt my credit score?
A loan modification may initially lower your credit score, but it will have a much less detrimental effect than a foreclosure, bankruptcy, or a string of missed payments.
What is the disadvantage of loan modification?
One of the drawbacks of a loan modification is that it’s possible you’ll have to pay more in interest over time. In some cases, the total amount you owe may even exceed the value of your home. Additionally, you might have to pay additional fees to modify a loan or face tax obligations.
Does loan modification After forbearance affect credit score?
In theory, a loan modification should not negatively affect your credit rating. That’s because you and the lender reached new loan repayment terms; as long as you uphold those terms, there shouldn’t be any issues to report.
What happens when you get a loan modification?
When you request a loan modification, your lender directly modifies the terms of your loan. Most lenders will only agree to modifications if you face an imminent foreclosure threat. If your mortgage is underwater, a loan modification can also help you change the terms of your loan.