The coronavirus pandemic is wreaking havoc on every aspect of our lives. Our financial lives will not be spared. Millions have applied for unemployment, and many of us are struggling to pay our mortgages, rents, credit card debts and other bills, let alone food and medication.
But that slippery slope of payment issues can lead to problems with your credit score during the coronavirus, which can affect you far into the future.
While your main focus should be on your health and well being, there are some things you can do to keep your financial house in order so you’ll be less stressed in the coming months.
Credit report basics
Your credit score is a number between 300 and 850 given by one of the three national credit reporting bureaus (Experian, Equifax, TransUnion) based on things such as the following:
- Your on-time bill paying history
- Length of time you’ve had credit
- Whether you’ve applied for new credit recently
- The number and type of credit accounts you have
Federal law gives you the right to get a free copy of your credit report from any of the three reporting companies mentioned, as well as from a government-approved site, AnnualCreditReport.com. And as of April 20, the three credit bureaus agreed to offer Americans free weekly credit reports for the next year.
It’s a good habit to check your score often, and don’t worry that it will lower the score. Your checking is called a “soft pull” and is not an issue. It’s only when there’s a “hard pull,” i.e., a company checking in order to give you credit, that your score may lower.
Having a “good” credit score — around 700 — helps you to qualify for lower rates on loans, purchase a home or even apply for certain jobs, for example. (During this crisis, however, lenders are worried about loan defaults and many are requiring stricter borrowing standards, including the need for higher credit scores than in previous years.)
Source: Experian
Rent and your credit score
If you’re struggling to cover your rent, the good news is that rent payments are hardly ever reported to the three credit bureaus. If the bureaus do receive the information, they will include it. Landlords who own many units or properties may report unpaid rents, but they must become a member of the credit agencies to do so. Landlords with few properties don’t usually report.
If you haven’t had great credit, however, paying your rent on time may help you build credit. You can connect with a rent reporting service (some charge a fee) that will get your payment history to the three reporting agencies.
If you’re having difficulties paying rent now, contact your landlord or property manager. They most likely will be willing to work with you and help you set up payment plans.
Contact creditors
Get in touch with your creditors as early as possible. You may be able to defer payments or request a forbearance, which offers some form of temporary payment relief. If you’re approved, you won’t be penalized for doing so.
Normally, lenders can’t report late payments to credit bureaus until 30 days after payment is due. However, Section 4021 of federal coronavirus relief law amends the Fair Credit Reporting Act for these temporary emergency conditions.
If you’ve gotten a deferment or forbearance, your lender can’t report missed payments as delinquencies. The prohibition on adverse credit reporting is in effect from Jan. 31 until the later of 120 days after the enactment of the CARES Act or 120 days after the end of the national state of emergency declaration, which was March 13.
In other words, if you’ve been paying on time all along, you’ll be considered in good standing for up to 120 days after the declared national emergency ends — as long as you live up to whatever bargain you made with your creditor.
If you were behind on your bills before you made any kind of agreement with your creditors, they may still report delinquencies until you catch up.
If you’re facing economic hardship and have difficulty paying your creditors — whether due to the current pandemic or not — you can send a short statement to the credit reporting bureaus explaining your situation.
Get help
This national emergency is affecting us all. Don’t shy away from getting help if you need it. The National Foundation for Credit Counseling is a non-profit organization that can connect you with a debt counselor.
We’ll eventually see an end to this national emergency. Taking care of your mind, body, spirit — and finances — will help you when we get there.
