In financial difficulty? Pulling your credit report can help


Have you just lost your job or have your working hours been reduced? Are you stressed about your bills and what could happen if you couldn’t pay it all? You have lots of company.

In a recent to study by TransUnion, 58% of respondents said they have been financially impacted by the coronavirus crisis and expect not to be able to pay their bills or loans in about six weeks. This is not a surprise, since on April 4, the US Department of Labor reported that more than 6.6 million Americans had filed for unemployment, bringing the total number of jobless claims to nearly 17 million in just three weeks – levels that have experts drawing comparisons with the Great Depression.

So if your current situation has you imagining all sorts of dire scenarios of what could happen if you can’t pay your bills, know that there are steps you can take to anticipate the situation. A good place to start is to get a copy of your credit report, especially if you’ve been good with your finances over the years.

How your credit report can help you now

Your credit report is essentially your financial calling card. It contains information, such as accounts in your name, original and current balances, the duration of those accounts, payment history, whether you have filed for bankruptcy, or if anything has been sent to collections. In other words, it shows how responsible or risky you are to a borrower.

According to experts, understanding the contents of your credit report can help you in two different ways: knowing where you stand with your creditors and renegotiating your current payment agreement.

“By reviewing your credit file and reviewing the information provided by the three credit reporting agencies, you get the most complete picture of where you stand in terms of financial obligations,” says Bruce McClary, vice president of communications to National Foundation for Credit Counseling (NFCC).

McClary says having this report on hand can help you analyze and better understand which debts you should prioritize and which lenders you should contact to assess your options.

Plus, your credit report can be a powerful tool when trying to negotiate a new payment deal with reluctant creditors, especially if your accounts are still in good standing. Credit card companies are working with borrowers affected by the pandemic.

“If you’re forced to be late on some bills and your creditors aren’t willing to work with you, this copy can serve as real proof that you’re a good consumer and low risk,” Dara says. Duguay, CEO. from Alliance of Credit Builders.

Creditors also have access to your credit report, of course. But you’re in a better negotiating position if you know it yourself, experts say.

How it can help you move forward

Understanding your credit report is not only useful for knowing which creditors you need to contact or for negotiating a temporary payment arrangement, but it can also ultimately help you if you need to take out a loan.

Although each lender has their own criteria, most will consider your credit history as part of their application process and give you the opportunity to explain any irregularities before making a decision.

“Many lenders who have direct interaction with you, such as an auto loan at the dealership, will review your credit report and you may have the opportunity to explain the situation,” says Duguay. “You can actually say, ‘Hey, look at that credit report I got in March.’ So when they see the difference between March and maybe June, it will show that it was really disaster related and had nothing to do with you being at risk.

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“If up to that point you were making timely payments for that particular account and all of your other accounts, then clearly that’s not something a lender has trouble with,” McClary says.

This will potentially increase your chances of being approved and getting a reasonable interest rate.

How to get a free credit report

You can request a free copy of your credit report from each of the three major credit bureaus (Experian, TransUnion and Equifax) in the United States once a year. You can do this by visiting their jointly operated website, AnnualCreditReport.com.

To get your free credit report, you will need to provide your name, address, social security number and date of birth. Once you submit this information, you should be able to access your report immediately. However, it should be noted that this copy does not include your credit score, but you can review all your information and make sure everything is correct.

You can also request a free copy of your credit report by calling this number free of chargealthough it may take up to 15 business days to process your request.

Protecting your credit during the crisis

Although most lenders provide some sort of economic assistance through the CARES ActThere are a few more steps you can take to protect your credit if you’re in financial difficulty:

Apply for an AW

“You can put in a special code called ‘AW’,” says Duguay. The AW is a code that lenders and credit reporting agencies use to mark an account as affected by a natural or declared disaster, or in this case, the COVID-19 crisis.

According to Duguay, having this code next to any open account is a simple way to protect your credit score while you get back on your feet. While this doesn’t necessarily prevent your credit score from dropping, it does protect your VantageScore, which is another type of credit score model that combines information found on the three major bureaus. It’s not something you can do yourself. To have this noted on your accounts, you must contact the lender or credit reporting agency directly, and they will do this for you.

Add a 100 word explanation

Another easy way to protect your credit, and this is something overlooked by many consumers, is to add a 100-word statement next to your credit report explaining any financial difficulties you may have faced that have leads to negative activity, such as a late or missed payment.

“All consumers have the right to put up to 100 words of explanation next to anything negative on their credit report. If there is something wrong, like if you couldn’t pay a bill because you were laid off or it was related to COVID-19, you should put a explanation. This won’t necessarily affect your credit score, but many people look at your credit report, not your score. So that’s where it would make a difference,” says Duguay.

You can add this statement by contacting each of the credit bureaus directly.

Call them before they call you

Finally, don’t be afraid to contact your creditors. “Even though it’s uncomfortable, I always tell people it’s best to call your creditors before they have to call you,” Duguay says. “If you call them before you have a problem, they’re much more willing to work with you than if you avoid them.”

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