If the coronavirus (COVID-19) outbreak has hurt you financially, working out a deal with a creditor or lender to skip payments or pay less than the required minimum amount could impact your credit even though, in most cases, it shouldn’t. So, you need to be proactive in reviewing and protecting your credit during this national emergency.
Credit Protections Under the CARES Act
Under the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, if you make an agreement with a creditor or lender for payment relief because you were affected by the COVID-19 pandemic, that creditor or lender has to report your account as current if you weren’t already delinquent. But you have to make an arrangement with the creditor or lender first to avoid adverse reporting, and you have to stick to the terms of the deal. You can’t stop making your payments, delay making payments, or pay less than the minimum amount without getting permission. If you were already delinquent at the time of the agreement, the creditor or lender can keep reporting the past-due status unless you bring the account up to date.
In addition, the CARES Act suspends payments on federal student loans held by the U.S. Department of Education for six months, until September 30, 2020. It also prohibits negative credit reporting during this payment suspension.
Despite These Protections, Your Credit Might Take a Hit
Some people, however, have taken a hit to their credit in violation of the CARES Act. For instance, consumers have alleged in a class action lawsuit that a federal student loan servicer illegally reported their student loan payments, which were suspended as part of the CARES Act, as delinquent. So, you can’t just assume that a creditor or lender will report your debts accurately.
What You Can Do to Protect Your Credit
To protect your credit during the coronavirus crisis, you need to verify that the creditor or lender is reporting your account the right way by reviewing your credit reports regularly. Usually, you get the right to receive a free copy of your credit report from each of the three major credit reporting bureaus once every 12 months. But because of the COVID-19 emergency, Equifax, Experian, and TransUnion are providing free weekly credit reports through April 2021.
If, after reviewing the reports, you find that a creditor or lender has improperly reported your debt as delinquent, you should file a dispute with the agency that made the report. If your dispute doesn’t resolve the issue, you can add an explanatory statement to the report. Once you file a statement about the dispute with a credit reporting agency, the agency must include it (or a summary) in any report that includes the disputed information. If the agency helps you write the explanation, it may limit your statement to 100 words. Otherwise, there isn’t a specific word limit. But it’s a good idea to keep the statement very brief. That way, the agency is more likely to use your unedited account. You might also consider initiating a lawsuit or filing a complaint with your state Attorney General’s office and the Consumer Financial Protection Bureau.