If you’ve experienced an unexpected strain on your finances due to COVID-19 or a natural disaster, creating a plan is a smart, proactive step to help you navigate this difficult time.
How you can protect your credit health
During times of hardship, you may be forced to face some tough financial choices. It’s encouraged to pay what you can to avoid late payments on your credit report. If you can’t make minimum payments, talk with your lenders to find out if they’re offering any assistance. You can also manage and stay in control of your credit health by:
|Check your credit report regularly||Your credit report tells your financial story to anyone who sees it. It’s important to make sure the information is accurate, especially if you’ll be contacting your lenders to discuss your financial situation and accounts.|
|Add a consumer statement to your credit report||A consumer statement is a note you can use to explain your financial situation and can be seen by anyone who views your report. This note needs to be 100 words or fewer (200 or fewer in Maine).|
|Take advantage of free tools||Use free tools to help you keep track of any changes to your credit information and give you peace of mind.|
How to talk to your lenders about financial hardship
Not all lenders offer hardship or forbearance plans, but if you’re struggling to make payments, you should contact your lender and explain your situation. You can find their contact information on your credit report or your most recent bill. Below are some additional tips and questions to guide you.
You can ask when your lender reports late or missed payments to the credit reporting agencies. Some lenders may report late payments immediately, and others may wait up to 30 days.
Consider asking your lender whether they offer their customers hardship or forbearance plans. These questions might help you in your conversation with them:
- Does your company offer a forbearance/hardship program?
- What are the criterias to apply for forbearance or hardship?
- Is there a difference between forbearance, deferral or hardship?
- How long does it take for a forbearance/hardship to take effect?
- Will fees (e.g., late, overdraft) be assessed while I’m in forbearance/hardship?
- How’s interest being calculated while I’m in forbearance/hardship?
- How’s my account reported to the credit bureaus while I’m in forbearance/hardship?
How lenders may report your accounts during financial hardship
After talking to your lenders about your situation, you may learn they’ll place your accounts in forbearance/hardship or deferral. Having an account in forbearance usually means your lender has agreed you can temporarily stop making payments on that account for a certain amount of time. A deferred account means the lender has agreed you can delay payment for a certain amount of time. Usually, this will show up on your credit report in the remarks field, with a comment saying “Payment Deferred.”
If you’re curious how your credit score will be impacted by an account in forbearance or deferral, check out the VantageScore or FICO websites for more information. It’s important to note, a credit score is based on many factors in your credit report, and different scoring models use different methods to calculate credit scores. Various credit scoring models may treat plans and codes differently, so you may see different scores while these are applied to your accounts.
Organizing your credit information and maintaining communication with your lenders are two ways you can help stay in control of your credit health during times of uncertainty.