In response to the COVID-19 pandemic the United States Congress drafted, passed and sent a bill called the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act” for short. On March 27, 2020 President Trump signed the bill into law. The CARES Act, which is several hundred pages long, temporarily amends the Fair Credit Reporting Act and will provide some limited protections for consumers as it pertains to their credit reports and credit scores.
Credit Reporting of an “Accommodation**”** [Sec 4021 (F)(i)-(iii)]
During the pandemic, if your lender or service provider makes an alternative payment arrangement with you, formally referred to in the CARES Act as an “accommodation”, regarding one or more of your payments on an obligation AND you make your payment under that arrangement then the lender or service provider must report the account to the credit reporting companies as being current.
If that accommodation includes your payments being suspended, meaning no payment is currently due because of the pandemic, then despite you not making any payment to your lender or service provider they must still report you as being current. Simply put, if your lender or service provider makes a deal with you and allows you to skip payments or to make reduced payments, they can’t report you as being delinquent to the credit reporting companies.
NOTE: Nothing in the CARES Act requires any lender or service provider to stop reporting you as being delinquent if you already were delinquent prior to the pandemic, or to delete pre-existing delinquencies or defaults.
Mortgage Loan Forbearance [Sec 4022 (a)(2)-(b)]
If you have a mortgage loan that is Federally backed, meaning it’s insured or securitized by the FHA, VA, USDA, Fannie Mae or Freddie Mac, and you’re suffering financial distress because of the pandemic you can request what’s called a “forbearance.” According to the CFPB, a mortgage forbearance “is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.”
Foreclosure Moratorium [Sec 4022 (c)(2)]
Unless your home is vacant or abandoned, servicers of Federally backed mortgage loans may not start foreclosure proceedings.
Student Loan Protections [Sec 3513 (a)-(d)]
If you have a Federal student loan, those that are held by the U.S. Department of Education, your payments will be suspended through September 30, 2020. Interest will not continue to accrue while your student loan payments are suspended. And, while your payments are suspended (not being made) those payments are treated as being “current” for the purposes of credit reporting.
For your protection, you may want to contact your student loan servicer just to formally request your forbearance. More information about the process can be found here, which is a page from the Department of Education website.
Best Practices
If you have a loan or a credit card, of any variety, and you know you will not be able to make your payments because of the impact of the pandemic, call your lender. Many lenders are working with their clients to suspend, modify or delay payments until some late date. But, these programs are for people how have, in fact, been impacted. Your lender doesn’t know if you’ve been impact unless you tell them. Don’t assume you automatically qualify for any of the above-referenced programs.
The views and opinions expressed in this article are those of the author (credit expert John Ulzheimer) and not necessarily those of VantageScore.
