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Your credit report and credit score may not be at the top of your priority list amid more pressing concerns around the COVID-19 (coronavirus) pandemic. That's absolutely reasonable.
However, when the world emerges from this crisis (and it will!), and normal plans and dreams resume, you may be seeking credit in one form or another—financing a home, buying a car, starting (or continuing) a college education, and so on.
Taking a few steps today can help safeguard your credit for those better times to come. Here's what you need to know.
Will Late Payments Be Reported During the Coronavirus Pandemic?
Many, many borrowers are facing the prospect of missing payments as a consequence of income loss during the pandemic. If you're among them, there's a good chance your lenders are prepared to work with you to provide payment relief without causing late payments to appear on your credit reports.
A wide array of creditors, including mortgage lenders and credit card issuers, are offering temporary payment relief during the pandemic. You must contact your lender(s) to take advantage of these programs, which include:
Forbearance
Under normal payment forbearance, lenders allow qualifying borrowers up to 12 months of suspended or reduced loan payments to help them recover from a financial hardship. After that forbearance period, the borrower is expected to repay all excused payments, plus interest and possible fees, in a lump sum or in up to 12 installments.
Qualifying for forbearance under ordinary circumstances typically requires the borrower to prove financial hardship, to show that the hardship is temporary, and to give evidence that they'll be able to resume regular payments at the end of the forbearance period.
The COVID-19 pandemic is certainly not "ordinary circumstances," however, so many lenders are approving forbearance for victims of COVID-19 hardship. Furthermore, these institutions are working with borrowers to aid them at the end of the forbearance period to work out repayment terms or loan adjustments as necessary to prevent further hardship.
Specific forbearance programs vary by lender, and you must connect with each of yours to request forbearance. Follow instructions on your lender's website or use the phone number that appears on your billing statement. Customer service operations at many lenders are swamped, so you may need to be persistent and patient.
As reflected in your credit report, any of your accounts placed in forbearance under the CARES Act will be "paused" in the payment status they are at when forbearance begins. If the account is current and in good standing, it will stay that way even if payments are reduced or suspended during forbearance. If an account is, say, 30 days past due when forbearance starts, it will remain at that status (and not rack up further delinquency) during the forbearance period.
Natural-Disaster Code
Experian and the other national credit reporting companies have put in place a system that enables lenders to add a statement along with a special code that indicates the consumer has been affected by a natural or declared disaster.
To get your missed or reduced payments assigned the natural-disaster flag, you must inform your lenders that they are pandemic-related.
What Are My Options if I Can't Make a Payment During the Crisis?
Here are steps you can take in different debt categories if you know you will miss at least one payment on your account.
Credit Cards
Under guidance from the Federal Reserve Board of Governors and several federally backed agencies, most credit card issuers are making exceptions for cardholders financially impacted by the coronavirus.
To help you find payment relief programs that apply to you, Experian has compiled a list of card issuers and links to their COVID-19 programs. If your lender isn't listed, it may still have a relief program, so check its website or call the cardholder services number printed on the back of your card.
Rent
If you are having difficulty covering your rent or are facing eviction in connection with COVID-19, reach out to your landlord as soon as possible to discuss extending your payments or making other arrangements to help cover your rent. If your rental property isn't covered by the CARES Act, you may be protected by measures enacted in your state. Many states have suspended evictions and foreclosures during the pandemic. You can find details that apply to your specific state of residence on the websites of your state's attorney general, state courts or legal aid programs.
Mortgages
If you're facing the possibility of missing mortgage payments in the midst of the coronavirus crisis, your lender may have a plan for helping you.
Federal legislation signed in late March, known as the Coronavirus Aid, Relief and Economic Security (CARES) Act, offers a wide range of relief options for borrowers with federally backed mortgages, including mortgage forbearance for up to 12 months, followed by mortgage modifications if needed.
If you're a homeowner, contact your mortgage servicer (the company that collects your mortgage payments) for information on assistance under the CARES Act.
Student Loans
Federal legislation exempts borrowers with certain federally backed student loans from payments until at leat September 30, 2021. The excused payments must be repaid later, but no interest or penalties will apply for the suspended-payment period.
How Late Payments Impact Your Credit Score
If you've entered into payment forbearance or deferment agreements with your lenders, payments that are reduced or suspended during forbearance will not be considered delinquent, and will not affect your account's standing on your credit reports.
If you make partial payments or miss them altogether without formalizing an arrangement with your lender—even if your missed payments are COVID-19-related— you can expect them to be reported to the credit bureaus and to appear on your credit reports as delinquent. (Late payments made without your lender's consent can hurt your credit score significantly.)
It's always best to keep up with your debt payments if you can, making timely payments on mortgages and auto loans, and covering at least the minimum payment due on credit card bills as you are working through a financial hardship. However, as noted above, if you qualify for COVID-19-related relief measures, you can lower your payments without incurring delinquencies.
What to Do if a Late Payment Is Reported
If a late payment is reported in error, or if a delinquency your lender agreed to assign natural-disaster status isn't noted accordingly, you should submit disputes to all three national credit bureaus to correct the entries and protect your credit scores. If you have backing documentation from the lender, you can provide it when you submit your dispute.
Consider adding a consumer statement to your credit report. You can use this option to briefly explain circumstances that led to a specific series of missed or reduced payments on a single loan or account, or to describe general financial difficulties that led to missed payments on multiple accounts.
Consumer statements don't negate delinquencies, and they won't help your credit score, but a lender reviewing your credit report as part of a loan application could give it consideration, and it could spark a beneficial conversation with a loan officer. Just be sure you remove the statement once your account has moved back into positive status or been removed from your credit report. A statement that informs lenders of past financial difficulties won't help you once the difficulty has passed.
To help you monitor your credit status during the pandemic, Experian and the other national credit bureaus are providing free weekly access to your credit reports at AnnualCreditReport.com.