If you’re one of millions of Americans who have faced job loss or reduced income from the Covid-19 pandemic and are facing financial hardship, you may be worried that missing rent and other payments will affect your credit score. The good news is that at least for the near-term, your credit score won’t be downgraded, as long as you follow a few key steps. (If you do continue making your rent payments on time every month, your credit rating will still benefit if your landlord reports your payment activity through a service like RentReporters.)
Unable to pay your rent. As we discussed in our last blog post, tenants who are unable to make rent payments due to Covid-19-related issues should talk to their landlord right away. Through an honest conversation you can ask for some leniency such as having them extend payments over several months, asking them to lower your rent or make other arrangements to help you get through this difficult period. Additionally, the CARES Act, passed by Congress last month, provides for a suspension or moratorium on evictions for renters of federally subsidized housing or whose landlord has a federally or GSE-backed mortgage. To find out if you qualify you can ask your local housing authority, or your landlord or property management company. If the property you’re renting doesn’t qualify under CARES, individual states have enacted other protections that you may be entitled to, such as suspended evictions and missed payment penalties. To find out what you’re entitled to, visit the websites of your state’s attorney general, state courts or legal aid programs. The Consumer Financial Protection Bureau website is also an excellent source of information and resources to help you understand the options that are available to you. Note that even if the CARES Act eviction moratorium applies to you, rent payments are still due on the usual date – so if you can pay your rent, you should continue to do so!
Unable to pay loans, credit cards, and other bills.As for leniency with credit card payments, loans and other expenses you are struggling to pay, you have two options
Forbearance – in normal times, individuals experiencing financial hardship can qualify for financial forbearance, which suspends or reduces loan payments for some period of time, after which the borrower must make up all missing payments. During the Covid-19 crisis, lenders are approving forbearance and helping borrowers with repayment terms and loan adjustments to prevent further hardship after the forbearance period ends.
Disaster Code — when consumers are affected by a natural or declared disaster, lenders can add a statement with a special code to signify that the borrower is facing financial hardship and will need special accommodations. For Covid-19-related issues, there is a special code that applies to pandemics. Ask each of your lenders how this code might help you.
Every lender’s forbearance and disaster code programs differ, so in order to qualify you need to contact each of them separately. As for how this impacts your credit score, if you have entered into payment forbearance or other deferment, your accounts will be “paused” until the period ends so that any missed payments will not affect your credit score
Protect Your Financial Health in Uncertain Times
During these uncertain times, it’s important to protect your financial health and take advantage of services that can improve your credit whenever possible. Through April 2021, all three credit agencies (Equifax, Experian, TransUnion) are offering free weekly online reports at https://www.annualcreditreport.com/index.action. The reports do not include your credit score but are intended to help you manage your financial health as you navigate through the coronavirus pandemic.