sure those who are dealing with Hurricanes Harvey, Irma and Maria have a
million other things to worry about besides their credit reports and
credit scores. But when storm victims, their family members and the
relief workers get some normalcy back in their lives and refocus on
their finances, there will be some things they will want to understand
regarding credit reporting. There are, in fact, credit reporting
standards and guidance from the credit reporting industry, which
specifically address natural and other “declared” disasters.
and other data furnishers provide information to the three national
credit reporting companies (Equifax, Experian and TransUnion) using an
industry standard format called Metro 2. And these data furnishers are
instructed on how to properly report under the Metro 2 format via the
Credit Reporting Resource Guide or, as it is referred to more
informally, the Metro 2 manual. It’s important to have a basic
understanding of the Metro 2 manual because it addresses how natural
disaster credit reporting is to be handled.
When reporting to
the credit reporting companies, lenders can add a code to their accounts
or “trade lines” which indicates that their customers or borrowers have
been “Affected by natural or declared disaster.” If a lender uses this
code, formally referred to as a Special Comment Code, the notification
about a disaster will appear alongside the trade line for the customer’s
account. It’s incumbent on the lender to insert the code initially and
to remove the code after the event.
Lenders should connect with
their credit bureau representative to understand how to report natural
disaster codes on their customers’ accounts.
Are My Credit Scores Impacted?
VantageScore 3.0 and 4.0 models are actually different than other
credit scoring models because they allow for special treatment of
victims of a natural disaster. With other conventional models,
consumers’ accounts that are reported with the natural disaster
reporting code may not be counted in the calculation of a credit score.
As a result, both positive and negative information is potentially
invisible to a consumer’s credit score and some consumers’ scores
actually may decline because they are not getting credit for the
positive information associated with the coded accounts.
the VantageScore 3.0 and 4.0 models, only payment history information
that would negatively impact a consumer’s credit score is “set to
neutral” so consumers are not impacted if they are not able to pay their
bills during this time.
Disclaimer: The views and opinions
expressed in this article are those of the author John Ulzheimer and do
not necessarily reflect the official policy or position of VantageScore