Is Negative Credit Reporting Suspended During COVID-19?

Is Negative Credit Reporting Suspended During COVID-19?

The Coronavirus Aid, Relief and Economic Security (CARES) Act doesn’t suspend negative credit reporting. However, it does modify adverse credit reporting and provide protections that could help prevent negative credit marks. The hope is that it will also help provide some financial support for the public and prevent a rise in bad credit

The coronavirus outbreak has blindsided the American economy and left many people scrambling when it comes to paying student loans, credit card bills and basic living expenses. TransUnion® reported that nearly 60 percent of Americans have been affected financially by the pandemic. 

It’s resulted in cut work hours, lost wages and hundreds of thousands of layoffs according to the Department of Labor. A recent Zest AI study found that 62 percent of Americans ages 18 to 44 are concerned about how COVID-19 will affect their credit scores. 

The CARES Act might not stop negative credit reporting, but you can take a look at what it is doing to help Americans stabilize for the time being.  

Does the CARES Act Prevent Negative Credit Reporting?

No, the CARES Act doesn’t stop negative reporting, though it could be a possibility in the future. The Senate Banking Committee and politicians such as California Senator Kamala Harris are in favor of passing more legislation to protect individuals’ credit scores and support those experiencing economic hardship.

In the meantime, the following modification to adverse credit reporting might be helpful for you.

A Change to Negative Credit Reporting

Negative reporting might not be suspended, but the CARES Act does adjust how it works by amending the Fair Credit Reporting Act (FCRA). 

If you receive an accommodation for a loan because you’re affected by the coronavirus pandemic, and if you were current on the account before you received the accommodation, your loan provider must continue to report your account as current. (It doesn’t affect your account status if you were already delinquent on payments.) This can protect your credit.

Accommodations can be any of these things:

  • Partial payments
  • Deferred payments
  • Forbearance
  • Loan modifications
  • Any other assistance or relief

Talk to your creditor or lender to learn about your options for accommodations, and don’t change your payments until you have a written agreement that you have permission to do so. 

Other Ways the CARES Act Can Help You

In addition to modifying how negative reporting works, the CARES Act also provides financial hardship assistance, temporary payment freezes and benefits to protect the public and their credit reports.

Graphic: What the CARES Act Does

Federal Pandemic Unemployment Compensation

Through July 31, 2020, approved applicants will receive an extra $600 of unemployment insurance funds. This includes qualified freelancers, furloughed workers and self-employed workers. 

For those that use all of their unemployment funds, the bill allows them to receive an extra 13 weeks of assistance and $600 in relief aid. 

How Does This Help You?

An additional 13 weeks of support and funds could help unemployed Americans meet monthly living expenses. Extended grace periods with participating companies can give the unemployed some breathing room when it comes to paying bills, which can be beneficial for their credit. 

Temporary Student Loan Forgiveness: 

The CARES Act protects those that are  by suspending payments and interest until September 30, 2020. For those that can make payments, the amounts are applied to their loan’s principal balance. While private student loans are not included, lenders can opt to take part. 

How Does This Help You?

Suspending student loan payments and interest rates will give borrowers time to recover, without defaulting and tarnishing their credit reports. 

Small Business Paycheck Protection: 

In 2019, 30.7 million small businesses were registered in the United States, with 5.9 million Americans on their payrolls. The CARES Act’s Small Business Association (SBA) Paycheck Protection Program (PPP) ensures that approved businesses receive benefits and payroll funds. This enables small business owners to continue operating, maintain staff and manage other expenses. 

The Senate Committee released a guide and list of requirements for qualifying, noting the following as potential candidates: 

  • Entrepreneurs and sole proprietorships
  • Independent contractors
  • Tribal businesses
  • Employee-owned businesses and cooperatives
  • Businesses that operate with 500 or fewer employees in a single location

How Does This Help You?

The PPP gives companies a temporary source of additional income. It can help small business owners pay bills and operate without fear of foreclosure or bankruptcy.

If your company doesn’t meet the eligibility requirements and you lose your job, you’ll need to apply for unemployment. With more than 36 million people applying for unemployment in the last two months, it’s possible you’ll have to wait more than six to eight weeks for your first check. 

Are Companies and Banks Helping Prevent Negative Credit? 

The credit bureaus and the American government are not the only ones working to help the public. Mobile providers, banks and credit card companies are getting involved to help ease the financial burden. 

Graphic: Mobile service providers, banks and credit lenders are waiving late fees, lowering interest rates, and extending payment grace periods.

Mobile Providers

With so many Americans working from home, internet and mobile network usage are at all-time highs. AT&T, Verizon and T-Mobile are working to keep networks streamlined and running. They are also temporarily suspending account terminations and waiving late fees. 

Banks and Credit Card Companies

The United States Chamber of Commerce is encouraging banks to help consumers during the coronavirus pandemic. The New York Department of Financial Services now requires all banks in the state to provide financial support to patrons impacted by the COVID-19 pandemic. Major credit card companies are doing their part by creating financial hardship programs for consumers.

Be sure to contact your mobile provider and financial lenders to learn about their financial hardship programs. 

What Is the IRS Doing to Help? 

The IRS has extended the filing deadline for 2019 income taxes to July 15, 2020. Interest from unpaid balances will be frozen until the new deadline. 

Despite the extended grace period, the IRS is backed up and taking longer to send refund checks. Many Americans depend on the funds to make bill payments. Delayed tax refunds and thinly stretched finances have people concerned about how their credit scores will be affected. 

What Are the Credit Bureaus Doing About Negative Credit Reporting?

Credit bureaus TransUnion, Equifax and Experian are trying to help Americans during this volatile time. All three are offering free weekly access to credit card reports, updated monthly credit scores, credit freezes and fraud prevention alerts. 

Even with the implementation of these services, you shouldn’t become complacent with paying your bills. It’s time to get strategic about your finances. In our post on charge-offs, we mentioned making partial payments to satisfy debt requirements—this could be a good option to help you through this time. Check with your credit card lenders, banks and loan collectors to better understand their policies about accommodations during COVID-19.

How to Protect Your Credit Score During the Coronavirus

Obtaining credit fraud protection is one of the best ways to protect your credit report. You can request free copies of your TransUnion, Equifax and Experian reports from AnnualCreditReport.com. This will allow you to track your accounts, identify errors and note other fraudulent activities. 

Since the start of the coronavirus pandemic, there has been an increase in cybersecurity hacks and financial fraud. The United States Department of Homeland Security released a warning about these malicious attacks. Enabling credit locks, credit freezes and fraud alerts could help protect you. If you do notice any wrongdoings, contact the Federal Trade Commission’s complaint assistant website and dispute the charges.

Graphic: How to Stay Safe with Credit Fraud Protection

It’s unclear how long we’ll feel the effects of the coronavirus, nor do we know how long it will take to recover. The suspension of negative credit reporting may not be a reality for now, so the CARES Act’s protections are the best hope for protecting credit reports. 

For more details on the CARES Act, visit the Library of Congress’s website. If you need help reading your credit report and finding ways to improve your credit score, feel free to contact a credit consultant for more information.