As many Americans now face the possibility of becoming delinquent on their debts and other bills, their credit scores could be adversely affected. Here are the steps people can take to ensure that they maintain as good a credit score as possible throughout the coronavirus emergency:
Get a copy of your credit report
By law, consumers are entitled to one free copy of their credit report every year from each of the major credit bureaus: Experian, TransUnion and Equifax. Having access to this information will prove vital as the country stares down what could be a major economic downturn, which could leave many people out of work for an extended period of time.
When reviewing your credit report, be on the lookout for any incorrect information or signs of identity theft. If there is evidence of false or incorrect information, start immediately to ensure it doesn’t take too big of a toll on your credit history.
A minimum payment is better than a late payment
Ideally, consumers should aim to pay the full amount they owe each month, especially with credit cards. While that may not be possible if you’ve lost your job or have reduced income, it is important to still make whatever payments you can, experts said.
“Late payments can negatively impact your credit score, so it’s better to make a minimum payment instead of no payment at all,” said Amy Thomann, head of consumer credit education at TransUnion. “Additionally, keeping credit card balances low can help limit the impact to your credit score.”
Additionally, for consumers who have signed up for Experian Boost or other services that report rent, phone or utility payments to the credit bureaus, making those payments could help to boost a person’s score.
If you usually mail a check or make one-time payments online, FICO recommends setting up recurring automatic payments that will be deducted directly from your bank account to avoid accidentally missing a payment amid the stress caused by the illness outbreak. If you have automatic payments set up, you should also make sure you have overdraft protection.
Ask your lenders if you can defer or reduce payments
Many lenders are offering relaxed payment terms or payment deferrals during the coronavirus pandemic. The Department of Housing and Urban Development and the Federal Housing Finance Agency have stipulated that mortgage lenders should offer borrowers forbearance and loan modification options for home loans backed by the Federal Housing Administration, Fannie Mae and Freddie Mac.
When a borrower is granted forbearance, loan modifications or deferrals, that information is noted on the consumer’s credit report, and lenders can indicate that the assistance was provided because of hardship the borrower faced as a result of the coronavirus pandemic. Having that information on your report is a good thing, though.
“Placing borrowers in a temporary deferred payment plan or in forbearance, along with reporting an account status as ‘current’ instead of as ‘delinquent’ will permanently ensure that a borrower’s FICO Score won’t be impacted by late payments related to the effects of the COVID-19 outbreak,” a spokeswoman for FICO said.
Consider adding a ‘consumer statement’ to your credit report
In addition to the natural disaster statement lenders can add to a person’s credit report if they’ve been granted forbearance, consumers can add their own statements.
“You can add a statement to your credit report that says ‘I’m affected by the coronavirus’ or similar language,” said Rod Griffin, Experian’s senior director of consumer education and awareness. Doing this doesn’t adversely or positively affect your credit score.
However, having these temporary statements can be useful if you go to apply for a loan in the future. “A statement like that will help potentially tell more of your story if your report is reviewed manually” during underwriting, Griffin said.
Your credit score doesn’t have to be your top priority right now
It’s important to keep in mind that credit scores are always changing, Griffin said. While taking steps now to keep your credit in good standing will help consumers in the long run, it shouldn’t be at the top of their priority list right now either.