Ironically, widespread debt repayment relief as a response to COVID-19 could damage your credit report by injecting errors into it. I predict that, in many cases, creditors will tell you that you have extra time to pay but their computers that automatically report your payment history to the Credit Bureaus won’t get reprogrammed and you’ll end up getting black marks on your credit report that you don’t deserve!
As of this writing, the Corona Virus Disease of 2019 (COVID-19) is rampaging across the globe shutting down businesses, tanking the stock markets, and leaving tens of thousands of Americans out of work and without paychecks. It’s also depressing interest rates to historically low levels, making borrowing a real bargain for the foreseeable future. It’s no surprise that the biggest loans and the best rates will go to those folks with the best credit scores.
You want to be in the best position to take advantage of this “cheap money” in order to buy things that have been depressed in value and are likely to produce money for you in the future. Home refinance, rental property, education, and small business loans have all historically provided a solid return on investment. But you’re going to need to keep your credit score up to do it.
Here’s what I’ve personally seen when suing banks, creditors, and credit bureaus on behalf of consumers for over half a decade: the right hand of the company we’re suing had NO CLUE what the left hand of the company was doing! Amazing, isn’t it? You’ve felt this before, you had a balance transfer question so you called the number on the back of your card and when you were done with that and wanted to know about your reward points, you got transferred to someone with a completely different accent - who knew nothing about your first question.
So, here’s the risk that I’m predicting and what you can do to protect yourself: Companies like TRA Medical Imaging and LMH Health (and likely more in the coming weeks) are suspending debt collections and/or offering to modify payment terms and schedules. The risk is that creditors who tell you that because of COVID-19 you have extra time to pay will be modifying the terms of your agreement, BUT their computers that automatically report your payment history to the Credit Bureaus won’t get reprogrammed and you’ll end up getting black marks on your credit report that you don’t deserve!
Now, the good news. Those black marks can be fixed (and you might be entitled to compensation) but only if you keep careful track of what payment breaks you got from the creditor (keep those letters and emails and press releases!) AND you make sure that your credit report accurately reflects the same. So if you were granted an extra 60 days to pay and you didn’t pay until 60 days later, then there should be NO LATE MARK on your credit report.
Here’s what you should do:
Recap: Creditors may modify your terms of repayment in response to COVID-19, BUT their computers that automatically report your payment history to the Credit Bureaus won’t get reprogrammed and you’ll end up getting black marks on your credit report that you don’t deserve.
1. Call your creditor before you miss a payment to discuss a break,
2. Find out the details, will interest accrue, will your account go to collections, etc.,
3. Get it in writing. Don’t bank on anything until you see it in a letter, FAX or email to you,
4. If you've got a Mortgage Loan, be sure to request a forbearance in writing, and,
5. Don’t stress. Everyone’s in the same boat, you just want to be ready to come roaring back after the wave passes.