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Understanding Payment Deferrals And Credit Scores During COVID-19

Karman Kua Mar 26, 2020

The current situation might be making it difficult to pay your regular bills on time. However, this can be a big problem as payment history makes up  35% of your credit score.  As a way to provide extra support during this time, some institutions, lenders and companies are offering payment deferrals. 

What’s a payment deferral program?

Deferral programs allow you to delay your payment to a future date and are meant as a short-term measure if you are in financial stress. It’s important to understand that this doesn’t mean your account is ‘on hold’ or you’re getting ‘free money.’ 

In fact, depending on the program offered, it’s even possible that you could still be accruing interest. So even if payments are deferred,  interest could be building and you could pay more down the line. It’s a good idea to ask what happens ‘after’ the deferral period ends so you understand of the ‘real’ cost. 

If you haven’t already, start by getting your free credit report so you know where you stand. Next, create a budget and see if you can afford to keep up with your current schedule. Get help on how to do a short-term budget here. 

Does deferring a payment impact your credit score?

Deferred payments should NOT affect your credit score. Due to COVID-19, Equifax is working with lenders to ensure deferred payments do not affect your credit profile. Specifically, if companies or lenders implement a payment deferral program, then Equifax has asked that they not incorrectly report missed payments that could negatively impact your credit score. This doesn’t mean that mistakes can’t or won’t happen, so it’s important to check your credit report regularly and make sure you don’t have any late payments. 

What can you do to protect your score?

  1. Make sure you document the details when you arrange your deferral payment (date and name of the customer support representative). 
  2. Request confirmation that the payment has been deferred (preferably electronically).
  3. Watch your credit report so you can spot any errors. If you aren’t a member already, you can  sign up with Borrowell and monitor your credit report free - it only takes a few minutes. 

The Bottom Line

Contact your lender and ask what they’re doing to help during COVID-19. By speaking with them directly, you can negotiate a plan that works for you. Whatever decision you make, be sure to be vigilant and monitor your credit report.


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