Government agencies, credit bureaus and lenders have all added provisions to help people impacted by the coronavirus pandemic protect their credit. But many of these programs may soon be coming to an end.
This time last year, we could only speculate how the recently announced coronavirus pandemic was going to impact our financial lives. At that time, essential workers and those who could work from home were able to continue receiving their paychecks. But millions could not and were forced into unemployment. Many are continuing to lose employment or are unable to find work.
For the first group, lockdowns limited how they could spend their money, and many may have been able to save more than they had previously. But for the latter group, those same shutdowns and restrictions have been devastating.
We have gotten some positive news recently with additional government assistance, increasing vaccinations and lower unemployment. But the fact remains that many are still struggling to keep a roof over their head and food on their table. Government agencies, credit card lenders and credit reporting agencies stepped in early to offer help and much of that has continued throughout this crisis. But that help will begin winding down as the country opens up again. At the same time, Americans who have been out of work will find out if their jobs have survived the pandemic or have disappeared.
See related: Coronavirus and credit card debt
Credit provisions for those impacted by the pandemic
As a result of the CARES Act, the Consumer Financial Protection Bureau issued guidelines to creditors, which asked that lenders report consumers who have asked for and received either forbearance or payment deferment help as being current on their credit reports.
The CFPB also suggested that the lenders report to the credit reporting agencies about any special arrangements they had given to their customers. This served to keep credit scores from being damaged, while helping other creditors better understand where a potential borrower stands financially. The CFPB continues to update information to help you find available help for student loans, mortgages and other debt obligations.At the beginning of the pandemic, the three national credit reporting bureaus implemented a coordinated crisis response program allowing lenders to positively report all accounts as in deferment or forbearance. Once reported as such, those affected by COVID-19 would not have their credit negatively affected. Lenders reporting deferment or forbearance data to credit bureaus were not reported as derogatory, nor did it cause your credit scores to go down.
Additionally, lenders could add a special “natural or declared disaster” statement to a consumer’s credit report using a special code. VantageScore and FICO recognize that code and treat any accounts coded with the statement as neutral so that there is no negative impact.
Protecting your credit
We may be approaching the end of the forbearance or deferment period. Absent any new regulation, lenders would automatically begin reporting accounts as in (normal) repayment, returning to a standard reporting process. I strongly suggest that you review the terms of any arrangements you have made to make sure you know what will happen and when.
To keep on top of your credit, I would also advise all consumers to monitor their credit reports to ensure the information is updated appropriately. Some good news here is that the joint credit bureau sponsored website AnnualCreditReport.com, began offering free weekly reports early on in the pandemic. It has now extended those free weekly credit reports for consumers until April 2022. Even if you don’t think there are any problems right now, it is a good practice to check your reports periodically – especially while this benefit continues to be offered.
Each credit reporting bureau also created a COVID-19 portal to help people stay informed:
- Equifax: Equifax established the COVID + Credit Connection with helpful data. Using a myEquifax account, you can learn how to freeze or unfreeze your credit file, place a fraud alert or start a dispute. There is also information about the financial services industry’s response to the pandemic and suggestions on how to manage your money right now.
- Experian: The bureau’s website portal offers a wide range of information, which includes both educational articles and a news and resource section. Experian also continues to offer live programs every week.
- TransUnion: The bureau’s COVID-19 support center is updated regularly. The consumer assistance portal offers support, guidance and resources for consumers.
If you have been impacted by COVID-19 and are concerned about your debt payments, you should call your creditors as soon as possible to inform them how you have been affected and work with them to implement appropriate measures for your specific circumstance. Many issuers are continuing to help cardholders. Don’t wait until you are delinquent to reach out for help.
Asking for help as soon as possible will allow both you and your creditor to find the best solution – hopefully one that will keep you current. As you know, paying your bills as agreed and on time is the No. 1 factor in credit scoring. That has not changed, even in these times. So, if you can come to an agreement and are able to make payments, I strongly advise you to do so as long as you can.
I understand that things could change and you might think you can honor your original agreement and then find out that you cannot. Again, call your creditor and let them know. Early communication is key during these times. Don’t let fear or embarrassment keep you from reaching out.
If the help offered is not enough to bridge the gap between what you have and what they want, don’t be too concerned with a lower credit score. You must take care of your family’s needs before anything else. I suggest you know where your score is, but don’t obsess over something you can’t change right now. I will still be here to offer tips and help to get your score back to where you want it to be.
Remember to keep track of your score!