People are complaining about credit bureaus in record numbers this year.
You may also need to file a complaint, and here’s why.
In the aftermath of Covid-19, the CARES Act assured borrowers that if they made an automatic or voluntary ‘arrangement’ with their lender to defer or skip payments due to pandemic hardship, it would not be an issue. stain on their credit. report. Think: forbearance, deferred payments, partial payment plan or any other financial relief related to Covid.
Assuming your account was in good standing prior to the transaction, the lender must report your account as “up to date” to major credit bureaus by law. This way, you will protect your credit score and your access to credit in the future. But not everything will go as planned, and now borrowers are voicing their concerns.
Credit complaints are on the rise
Source: Analysis of Consumer Financial Protection Bureau data by US PIR and Frontier Group.
Since the start of the pandemic, complaints to the Consumer Finance Protection Bureau (CFPB) have increased by 86%. The “record numbers” are driven by problems with credit reports, says Ed Mierzwinski, senior director of the US Public Interest Research Group, which is monitoring the issue closely. Specifically, he says there have been hundreds of complaints with accounts mentioning the terms “pandemic” and “incorrect information” over the past seven months.
In Texas, a resident claims that a lender approved the request for deferral of payments “because of the impact of [the] COVID-19 pandemic â, only to find that their debt had been reported asâ past due â.
“It is unfair and inhuman treatment,” the complaint read.
In New York, a student loan borrower alleges a similar problem, and in Pennsylvania, another consumer mentions how the lender agreed to put their loan on hold and said the account “should not be reported as overdue. because of disaster tolerance “. And yet, according to the claim, it was.
All of this serves as an important reminder that while we are working to keep our finances in shape, we must also protect our credit vigilantly. Especially now, when historically low interest rates could make financing cheaper and lenders crack down on their borrowing standards.
Even if you’re not in the credit market right now, you don’t want to find out about these mistakes months or years down the road when they’re only harder to track down and correct.
Here are some more reminders from credit experts, especially if you are registered or plan to register for a pandemic loan modification.
1. Know how your new payment plan works (really)
Before signing up for a payment plan that offers pandemic relief, understand how it will work and what is expected of you to keep your account in good standing.
For example, not all deferral plans are created equal.
A â90 Day Deferment with Loan Term Extensionâ means that after the program ends, your monthly payment resumes, but the lender will extend your loan for an additional three months. A â90 day deferral with lump sum paymentâ, on the other hand, means that after 90 days you have to pay the deferred amount as a lump sum, plus the payment due for the current month.
âIt’s extremely important to understand that these payment plans are not meant to be permanent or ‘free’,â says Tom Quinn, vice president of scores at FICO. âThe time to discuss the repayment structure of the program is now when you apply to the program, not when the program ends. “
2. Get the lender’s promise in writing
You also want to be sure you hold the lender or credit issuer accountable for the âarrangement,â and your best bet is to have a solid paper trail that they’ll report your account as âcurrentâ to the credit bureaus. . This will come in handy in case you need any evidence to correct an error on your credit report.
âIf you contact your transmitter by phone, document the time, who you spoke to and the terms of the agreement. It might not be ‘official’, but it can still show the credit bureaus that you made a good faith effort to secure housing and understand the terms, âsays Beverly Harzog, credit card expert and consumer credit analyst for US News & World Report. . âSome issuers allow online difficulty requests. In that case, take screenshots to show your request and the responses, âshe adds.
3. Check your credit well and often
âThe only way to know if the lender says you are up to date is to check your credit reports,â says John Ulzheimer, credit expert, formerly of FICO and Equifax.
You can now check your credit report for free much more frequently, from once every 12 months to once a week at annualcreditreport.com. The increased access will be in effect at least until April 2021.
âI strongly recommend that you check your reports at least once a month to make sure your lenders are all reporting you up to date,â says Ulzheimer.
As for your score, you can also check it online. Some of the major financial institutions are now offering consumers free access to their FICO score and / or VantageScore, a newer scoring model. To find yours, first log into your banking portal and search the menu or ask for help.
4. Don’t panic immediately
What if your new payment plan is found incorrectly on your credit report? Does that automatically mean it could hurt your score? Not always.
âSome reports could be benign and some consumers will have credit already so bad that it can’t really get any worse,â says Ulzheimer.
FICO’s credit scoring models do not record forbearance and deferment reports as negative. And VantageScore has made recent changes to its latest algorithms to reduce the potential for any severe impact from these terms. But other words like “delinquency” or “delay” can really sting.
âDepending on the misinformation reported, this could have a negative impact on your credit score,â Quinn explains.
How much is not entirely clear, but be prepared for minimum double-digit cuts for even âdelinquencyâ on an otherwise healthy credit bill.
5. File a dispute if necessary. Prepare to wait
If you see an error in your report, dispute it immediately with the credit bureaus and also interact with the lender to resolve it, explains Quinn.
Here is an article where NextAdvisor’s Alex Gailey explains the best way to report an error on your credit report for free, including precisely what to say in your dispute letter to the credit reporting agency.
Note that disputes typically require a 30-day review, but it could take longer now with more people working from home and operational disruption. In a letter, the CFPB states that “the 30-day period may be extended to 45 days if the consumer provides additional information relevant to the investigation during the 30-day period”.
It’s not a fun wait, but at times like these you have to be your biggest advocate.