Because of the economic fallout from the coronavirus pandemic, each of the big three credit reporting agencies are giving consumers a free credit report once each week, instead of once each year, from AnnualCreditReport.com, through April.
People should take advantage of this offer from Experian, Equifax and TransUnion, especially if they are not making regular payments on their mortgage, student loan, credit cards or other debt under some sort of forbearance plan.
The Cares Act changed the way companies must provide information to “consumer reporting agencies” if they agree to suspend payments or make other “accommodations” during the pandemic period.
“If you have a credit card or mortgage in some kind of forbearance and are living up to the terms of that plan, you are reported as ‘current’ or ‘paid as agreed,’” as long as you were not delinquent before you entered the plan, said Francis Creighton, CEO of the Consumer Data Industry Association, which represents the consumer reporting industry.
The Cares Act also suspended — or made it easier to suspend — payments on some government-backed loans, so there are many more people in forbearance plans. There was some concern that companies might not be following the new reporting rules, said Chi Chi Wu, an attorney with the National Consumer Law Center.
One very large student-loan servicer is being sued for allegedly misreporting suspended student loan payments, causing some borrower’s credit scores to drop.
Technically, Section 4021 of the Cares Act amended the Fair Credit Reporting Act for the reporting of “accommodations” made during the pandemic period, which runs from Jan. 1 until either July 25 or 120 days after the national emergency declaration concerning coronavirus is terminated, whichever is later.
An accommodation “includes an agreement to defer one or more payments, make a partial payment, forbear any delinquent amounts, modify a loan or contract, or any other assistance or relief granted to a consumer who is affected by the coronavirus” during the pandemic period.
If a company agrees to an accommodation, and the borrower makes a payment or is not required to, it must report the account as current, unless the payment was delinquent before the accommodation was made. In the latter case, it must continue reporting the account the way it was before the accommodation was made, unless the consumer brings the account current. For example, if you were 30 days late when you went into forbearance, you would remain 30 days late until you bring the account current or the forbearance ends. (This does not apply if the account has already been charged off.)
The new rules apply to any type of payment accommodations, not just the new forbearance programs for government-backed mortgage and student loans established elsewhere in the Cares Act.
Homeowners with a government-backed mortgage who suffer a hardship because of the coronavirus can ask their servicer to suspend payments for up to 180 days, followed by another 180 days upon request.
The Cares Act automatically suspended payment requirements and waived interest charges from March 13 through Sept. 30 on federally backed student and parent loans owned by the U.S. Department of Education.
A lawsuit alleges that Great Lakes Education Loan Services reported suspended payments as “deferred” instead of current for millions of federal student loan borrowers. The mistake “immediately lowered” their credit scores provided by VantageScore Solutions and “jeopardized their access to credit,” said the lawsuit, filed last month in federal court in San Francisco, where the lead plaintiff, Katherine Sass, lives.
Besides Great Lakes, the suit names VantageScore, Experian, Equifax and TransUnion. VantageScore calls itself an “independently managed company whose members include” those three credit bureaus.
In a May 15 statement, VantageScore said, “Some consumers have seen their VantageScore 3.0 and 4.0 scores change as a result of the widespread use of forbearance and deferment codes for consumer loans on which lenders have given payment relief.” It decided “to make adjustments” to those scoring models “to minimize the negative impact associated uniquely with the usage of these codes.”
In response to the suit, Creighton said in an email that the three credit bureaus “continue to work with servicers to ensure that student loan and other accommodations are being appropriately reflected on consumer credit reports and can be updated if necessary.”
Everyone should periodically check their credit reports for mistakes, but if you have an accommodation, “check your report once a month to make sure it’s being reported correctly,” Wu said. “If you see a mistake, it’s pretty easy to click on a tab” and file a dispute. The credit bureau has 30 days to investigate. If it cannot confirm it’s a mistake within 30 days, “the negative information comes off the report,” Wu said.
If you disagree with the bureau’s decision, you can file an appeal. If you lose the appeal, you can put a statement in your file disputing the information, but automated underwriting systems generally won’t pick up this statement, Wu said.
Congress in 2003 required the three bureaus to set up AnnualCreditReport.com and provide free credit reports once a year. It’s a good place to check because it does not require you to buy other services or submit to marketing pitches, although you may see ads for credit monitoring and other products. The free report does not come with a credit score.
Checking your credit report is also a good way to see if identity thieves have opened accounts in your name. But it’s even better to prevent this type of financial identity fraud by freezing your credit report, said Eva Velasquez, CEO of the Identity Theft Resource Center. It’s now free and pretty easy to freeze your credit at each of the three bureaus, unfreeze it when you’re applying for credit, then refreeze it.
Very few landlords report rent payments to credit bureaus. Many cities and states have temporarily halted, or effectively halted, evictions. These moratoriums do not relieve tenants of making rent payments. After the moratorium expires, a landlord could take a tenant to court to attempt to evict them or collect missed payments.
Court judgments and liens no longer show up on credit reports, except for bankruptcies, Wu said. However, if any landlord turned unpaid rent over to a collection agency, that agency might report the account to a credit bureau and it would show up on your credit report and could hurt your credit score.
Some landlords report payment histories and evictions to specialty consumer reporting agencies that landlords use to screen prospective tenants.
If a landlord agreed to suspend or reduce rent during the pandemic period, it would be covered by the same rules that apply to reporting accommodations under the Cares Act, Wu said.
The Fair Credit Reporting Act gives people the right to a free copy of specialty consumer reports once every 12 months. To find a list of consumer reporting agencies, go to https://bit.ly/consumerreportagencies.