Will My Credit Score Go Down If I Can't Make My Payments Because of COVID-19?

TL;DR

The CARES Act requires creditors to report accommodations made for COVID-19-related financial difficulties, ensuring that borrowers' credit is not negatively affected.

Transcript

• Hey everybody, John Skiba here with the Arizona Consumer Law Group. And in today's video, I wanted to talk about how your creditors should be reporting your credit accounts to the various credit re porting agencies, if you've requested an accommodation due to the coronavirus/COVID-19. Now, recently, you likely heard on the news, they've recently ... Read More

Key Insights

• 😀 The CARES Act requires creditors to report accommodations made for borrowers facing financial difficulties due to COVID-19.
• 📞 Borrowers who reach out to their creditors and receive accommodations should have their loans reported as current.
• ❓ Delinquent accounts prior to January 31, 2020, may still be reported as delinquent.
• 💳 Charged-off accounts are exempt from the CARES Act's credit reporting provisions.
• ❓ Creditors can continue collection efforts on delinquent accounts, even if accommodations are made.
• 🥳 The CARES Act's credit reporting provisions cover a period starting from January 31, 2020, and extend 120 days from the enactment of the law or as long as a national emergency related to COVID-19 is declared.
• ❓ It is advisable for borrowers experiencing financial difficulties to reach out to their creditors for possible accommodations.

Questions & Answers

Q: How does the CARES Act impact credit reporting during the COVID-19 pandemic?

The CARES Act requires creditors to report accommodations made for borrowers facing financial difficulties due to the pandemic. This helps protect borrowers' credit scores.

Q: What accommodations can creditors offer without negatively affecting credit scores?

Creditors can defer payments, allow partial payments, forbear delinquent amounts, or modify loans. As long as these accommodations are made for COVID-19-related reasons, the loan should be reported as current.

Q: If I was already delinquent on my credit card before January 31, 2020, will the CARES Act protect my credit score?

No, if you were already behind on payments before January 31, 2020, the creditor is allowed to continue reporting the account as delinquent, even if they offer accommodations.

Q: Does the CARES Act prevent creditors from collecting on delinquent accounts?

No, the CARES Act does not stop creditors from attempting to collect on delinquent accounts. It only regulates how they report the status of the account to credit reporting agencies.

Summary & Key Takeaways

• The CARES Act, also known as the Coronavirus Aid Relief and Economic Security Act, has provisions regarding credit reporting during the COVID-19 pandemic.

• Creditors must report accommodations, such as deferred payments or loan modifications, as current to credit reporting agencies.

• Delinquent accounts prior to January 31, 2020, may still be reported as delinquent, but charged-off accounts are excluded from these provisions.