A Pocket Guide to Protecting Your Credit During Coronavirus
Your credit plays a key role in financial opportunities, today and in the future. Understandably, the current pandemic environment is making it more challenging. But still, there are actions you can take to protect your credit.
Here are tips that the Consumer Financial Protection Bureau suggested for protecting your credit during these trying times.
Request A Free Copy of Your Credit
Did you know that you're entitled to a free credit report every year? Unlike the hard credit inquiries that creditors do when you apply for credit, this free annual report does not negatively affect your score.
Additionally, Equifax, TransUnion, and Experian (the three nationwide credit reporting agencies), also provide you with a free credit report every twelve months.
Reviewing your credit report is especially helpful for finding errors that are lowering your score. If your report is inaccurate, contact the credit reporting company to dispute the mistake and request it's removal. Depending on what the error is, your score can go up significantly.
Be Proactive About Your Mortgage
We shared different ways that you can manage your mortgage payments during the shelter-at-home order in previous posts. But the number one takeaway is that you should never abruptly stop making mortgage payments. Missed or late payments will be reported to the bureau by the lender.
If your ability to make mortgage payments is hindered due to Coronavirus, your next move is to talk to your current lender. If your mortgage is government-backed, then there is existing legislation that can put your loan in forbearance.
Additionally, your current lender may also have a loan modification option that can provide temporary relief.
For a long-term solution, the best option is to refinance your current mortgage. Rates are currently at record lows, and refinancing could lower your monthly payment.
Even those that can keep up with their monthly mortgage payment are still choosing to refinance. Current homeowners are choosing to refi to reduce their monthly payment or pay down the principal faster or to do both!
More Information on Your Credit During CARES Act
Credit Reporting under the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is legislation that temporarily alters the way your loan payments are reported to credit bureaus. Under this current legislation, creditors agree to "accommodate" you when it comes to reporting deferred payments, partial payments, forbearance, mortgage modifications, or other types of payment relief.
Note that this only applies if you're affected by the coronavirus pandemic, entering an agreement with the creditor and whether you were already delinquent before the CARES Act was initiated.
Here are typical scenarios:
- If your account was current and you've entered an agreement with the creditor to skip or make a partial payment, then they'll report that you're still current on your payment.
- If you were already delinquent and make an agreement after the fact, then your account will maintain that status until you bring it current.
- Similarly, if your account was already delinquent and you bring your account current while under the modified payment terms, the creditor must report that you're current.
Note that these reporting modifications apply only to agreements made between January 31, 2020, and 120 days after the COVID-19 national emergency ends.
Again, the BIG takeaway is that you must be proactive and talk to your creditors to see what your options are --and NEVER stop making payments abruptly.
Your financial health is essential during this pandemic, and, as always, we're looking out for your best interest. Need more personalized mortgage guidance? Please contact us! We're available and fully operational, eager to help you secure your financial future.