How the COVID-19 Deferrals on Your Credit Cards Impact the Credit Report

Oct 06, 2022 By Triston Martin

Due to the widespread of COVID-19, many people have had to cut down on their spending. Some credit card companies have responded by allowing affected customers to postpone payments. Using a payment deferral program, you may delay payment without negatively impacting your credit. A payment that is more than 30 days late will often have a negative impact on your credit score.

What Effect Do Monthly Payments Typically Have on Credit Reports?

Creditors are required to update the three main credit agencies (Experian, Equifax, &'' TransUnion) monthly with information about your payment history. According to Rod Griffin, senior manager of public education &'' lobbying at Experian, "under typical conditions, whenever you skip that first complete payment schedule, it's bound to have an adverse effect on your ratings." A 30-, 60-, or three-month late payment will be shown negatively on your credit record. Griffin said in a conversation that it is difficult to tell how much a late payment would damage a score since it will rely on the individual's credit history.

However, if you are consistently late with payments, and this is shown on your credit record, it will have devastating consequences. Payment history makes up about 35 percent of your credit rating. If you neglect to pay a bill for 30 days or longer, it may have a negative impact on your credit score and result in increased interest rates or the denial of credit applications.

In What Ways Have Coronavirus &'' Credit Card Deferrals Altered The Need For Payment Reporting?

Many credit card providers are allowing users to temporarily suspend payments amid the coronavirus situation without affecting their credit scores. Griffin stated that "new procedures have been implemented to assist individuals at this time" because of the epidemic. In particular, several credit card companies are providing interim rate reductions and deferrals of payments. Survey results from American Customer Credit Assistance in September found that 23 percent of respondents obtained payment reductions, and 40 percent received payment deferrals. An essential point to remember is that delaying payment is a legal procedure. That is to say, and you cannot arbitrarily choose to stop making payments. To request a delay, you must get in touch with your issuer either on their website or by phone.

If your issuer allows a deferral, you won't have to make payments, and they won't disclose payment activity. Because of this, "missing" payments won't hurt your credit. Griffin warned that a postponement of payments would show up as a negative item on credit reports for the duration of the delay. It will show that the account is deferred, but in reality, it will be up to date. Once it's over, everything returns to normal on your credit report, and you may continue where you left off," Griffin said. Since the beginning of the coronavirus epidemic, the majority of major credit providers have provided their clients with some type of payment assistance. For instance, Wells Fargo suggests that customers who have questions or concerns contact the bank directly. All accepted applicants will then have their bank accounts marked as "current" in the relevant credit reporting databases.

Verify Your Deferral by Viewing Your Credit Report

Griffin advised consumers to check their credit reports more often to ensure accurate information was being recorded. All three agencies were offering weekly free evaluations until April 2021 at Griffin advised getting in touch with the credit card company to request adjustments if, after two or three weeks, it appears that anything was recorded improperly.

What Does COVID Relief Not Include?

The payment deferment would not remove the late payment from a credit record if the missed payment was more than 30 days old. The payment delay, however, will not worsen further. If you are one month behind and then put off paying for two months via deferral, you will only appear as one month behind on your credit record. However, if you are able to make up for that late payment while the deferral period is in effect, the status of your account will be modified to indicate that it is current. Griffin stated this. You should always be well-informed before entering into any kind of deal with a creditor. You may, for instance, be interested in learning whether or not your account is being placed in a deferral or forbearance status. With the second option, interest will keep building up, which could make your minimum payment higher once you start making payments again.

Other Considerations

Late payments won't be reported to credit bureaus until they're 30 days overdue. It's important to note that the issuer will not record a late payment if it's just three days overdue and you pay the balance in full immediately afterwards. When payments are more than 30 days late, Griffin warned that they would be on your record for seven years. When a payment is more than 180 days overdue, the issuer has the option to "charge it off" as a deficit, and the delinquent will appear on your credit report for seven years. Although you may attempt to convince your credit card company to waive the delayed payment if you've experienced hardship, there's no assurance they'll accept your request. Griffin noted that if a belated payment stayed on a credit record for the entire seven years, the negative impact would lessen with time.

Related Articles