Are you worried about credit reporting and what might happen to your credit during the COVID-19 lockdown? Businesses have been shuttered for two months or longer, millions of homeowners are applying for mortgage forbearance due to lost income, and many struggle to keep up with their monthly payments. What do you need to know about credit reporting during COVID-19?
Credit Reporting Is Still Happening
The government’s consumer watchdog site, The Consumer Financial Protection Bureau (CFPB), reports that creditors are still reporting data to the three major reporting agencies (Equifax, TransUnion, Experian) but “many lenders” are being “flexible” when it comes to late or missed payments. But much depends on the creditors and it’s not safe to assume you have ANY protections above making your regular payments.
In April 2020, CFPB issued a press release announcing both the passage of the CARES act and a policy statement” outlining the responsibility of credit reporting companies and furnishers during the COVID-19 pandemic.”
Under the CARES Act, lenders are required “to report to credit bureaus that consumers are current on their loans if consumers have sought relief from their lenders due to the pandemic” according to CFPB.
Note the “if” in that sentence. If you have not actively sought relief for your credit card debt, your mortgage, insurance payments, or other monthly obligations, the lender is not obligated to withhold negative credit data from the credit agencies on your behalf.
You read that correctly–in order to qualify for ANY coronavirus-related financial relief, extra leeway on credit reporting over missed or late payments, or any other issue, you the borrower must reach out to your creditors and ask for help.
Creditors have some expectations, too. CFPB requires lenders to comply with the CARES Act policies discussed here, but the agency also “encourages lenders to continue to voluntarily provide payment relief to consumers and to report accurate information to credit bureaus relating to this relief”.
Note the word “voluntarily” in that quote above. As a consumer, especially consumers who need a major line of credit such as a car loan, home loan, student loan, or other financial products, you cannot assume your creditors will always volunteer to provide relief. You may be required to seek legal redress in some cases (however rare), and that’s where the expertise of a lawyer well-versed in these issues (not all lawyers are) comes into play.
What You Need To Know
- Those who are not yet delinquent on their accounts who enter into an agreement to make a partial payment, skip a payment, or other help, your creditor should report to credit reporting companies “that you are current on your loan or account” according to CFPB. But ONLY if you meet the terms of the agreement.
- For delinquent accounts, any agreement you enter into may require your account to be listed as delinquent until it is brought current once more, according to CFPB.
- “Already delinquent” accounts with such agreements must be listed as current once you bring the account current again.
- CARES Act requirements in these cases may apply only to agreements made between January 31, 2020 and the later of either 120 days after March 27, 2020 OR 120 days after the national COVID–19 emergency is declared over.
Joe Wallace specializes in personal finance, military affairs, and consumer protection topics. Since 1995, his work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and collects unusual vinyl records, which gives him an excuse to write the vinyl blog Turntabling.net.