As the COVID-19 public health crisis continues to cause chaos in the U.S. economy and job market, more families are struggling to make their mortgage payments. This reality has led to much discussion on the topic of mortgage forbearance. But how does a loan forbearance affect my credit history?
Can the CARES Act help with my mortgage?
The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act places special requirements on companies that report your payment information to credit-reporting companies. These requirements apply if you are affected by the coronavirus disease pandemic and if your creditor makes an agreement (called an accommodation in the Act) with you to defer a payment, make partial payments, forbear a delinquency, modify a loan, or other relief.
How your creditors report your account to credit reporting companies under the CARES Act depends on whether you are current or already delinquent when this agreement is made. Let’s look at this more closely:
- If your account is current and you make an agreement to make a partial payment, skip a payment, or other accommodation, then the creditor is to report to credit reporting companies that you are current on your loan or account. This applies only if you are meeting the terms of the agreement.
- If your account is already delinquent and you make an agreement, then your account will maintain that status during the agreement until you bring the account current.
- If your account is already delinquent and you make an agreement, and you bring your account current, the creditor must report that you are current on your loan or account.
This CARES Act requirement applies only to agreements made between January 31, 2020, and the later of either:
- 120 days after March 27, 2020, or
- 120 days after the national emergency concerning COVID-19 ends.
The CARES Act also applies to certain federal student loans and includes requirements relating to suspending payments and credit reporting. During the period that payments on federal student loans are suspended by the Department of Education, any payment that has been suspended is to be reported as if it were a regularly scheduled payment made by the borrower.
If you’re a homeowner who’s lost your job for reasons related to the COVID-19 coronavirus, you are probably like thousands of others facing financial trouble. The forbearance provisions in the CARES Act can help you through this time. Make sure you read the fine print of any agreement you sign with your various lender.
If you’re already in a credit crisis and need help, turn to the credit repair experts at Scorewell, Inc. We offer complimentary consultations and will only take on cases in which we truly feel we can help. Contact us today to set up an appointment.