Do Deferred Payments Affect Your Payment History?

Dear DFR,

Deferred payments do not negatively affect your credit history. Passed in response to the ongoing pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act made it possible for those who have been impacted to receive certain payment accommodations, such as account forbearance or deferment. For example, if you're facing hardship due to the pandemic and have a federally backed mortgage loan, you have the right to request a forbearance for up to 180 days, with the option to extend it another 180 days.

While some other CARES Act provisions have expired, or will soon, it's important to know that you may still have options available. As the COVID-19 crisis continues to affect consumers and the economy, governments and lenders may step in to provide further relief.

What Is Experian Doing to Help?

Experian and the other credit reporting agencies have put in place tools to enable lenders to report your account as in forbearance or deferment using a special code that indicates the account has been affected by a declared disaster. The disaster indicators complement any relief mandated by federal or state governments, including the CARES Act.

When lenders report these accounts to the credit bureaus as in deferment or forbearance, as is required by the CARES Act, the account status will continue to show the same status it did when the account was first placed under the accommodation. This means that no new negative information will be reported, and the status will remain until the lender requires payments to resume. For example, if your account was current when it went into deferment, it will remain showing as current. Likewise, if your account was 30 days past due at the time it entered forbearance, it will continue to show as 30 days past due when you begin making payments again.

Disaster codes help to ensure that those directly affected by the pandemic have time to recover and will be able to pick back up where they left off once the accommodation period ends.

Providing payment accommodation to those who need it, while also continuing to report on-time payments for those who don't, benefits everyone. It allows consumers who need to apply for new loans and other credit during this time to have their payment histories kept up to date, and it protects the payment histories of those who have been unable to make regular payments during the crisis. This means lenders can continue to assess individual credit risk and approve new credit applications.

Understanding Your Account Forbearance or Deferment

Before entering into any new agreement with your lender, be sure to fully understand the terms, including whether interest will continue to accrue while your account is "on hold." If your account is deferred, interest charges may stop during the deferment period, but an account in forbearance may continue to accrue interest. This may end up increasing the amount of your debt.

Make sure you understand when payments are set to resume so that you can avoid missing your first payment once your payment accommodation period ends. Always ask for a copy of your agreement so you can refer back to it as needed.

Thanks for asking.
Jennifer White, Consumer Education Specialist

This question came from a recent Periscope session we hosted.