News & Trends

Government Reopens, but Will the Shutdown Affect Your Credit Score?

If you are one of the estimated 800,000 federal government employees impacted by the government shutdown, you may be worried about possible damage to your credit. The shutdown surpassed 35 days, and many federal workers missed two paychecks, which has caused financial distress for many.

The good news: A temporary deal was struck that includes a stopgap funding measure which funds the government through February 15. That three-week funding deal allows workers to be paid within a few days, according to news reports, and the government to reopen.

Any change to your credit depends on whether you miss a payment, such as a mortgage, rent, credit card or car loan payment—and how late that payment is.

What if I Pay My Bill Late?

One late payment most likely won't significantly impact your credit if your credit history is in good standing—and it might not appear on your credit report at all. Lenders don't typically report late payments to the three credit bureaus (Experian, TransUnion, and Equifax) unless payments are 30 days or more past due. If you pay late but within that 30-day window, you might get charged a late fee, and in some cases, your interest rate could increase, but those actions won't show up on your credit report.

Can the Credit Bureaus Help Me?

Credit bureaus don't know which workers are furloughed, or whether or not a consumer is impacted by the shutdown. They receive payment information from lenders (or data furnishers), which are free to decide how or whether they will report late payments. (The one exception is servicers of federal student loans, which are required to report late payments to the credit bureaus.) Many banks and credit unions that work with federal employees are offering financial help for their customers affected by the government shutdown. That help might include low- or no-interest advances on paychecks and loans for employees who are running out of reserved savings.

"The government shutdown is one of those situations where a person's financial life may be disrupted and paying their monthly bills could be a struggle," says Susan Henson, credit ambassador for Experian. "If you are a government employee who missed a paycheck, contact your lenders to talk to them about your options. Many lenders have options on how to report your accounts to the credit reporting agencies so the account will not be reported as a late payment and negatively impact credit scores."

What You Can Do Now

If you are a federal employee and feel that you're at risk of missing a mortgage, rent, car loan or any other type of bill payment, your first step should be to contact your lender. Here is a list of some of the mortgage lenders, banks, credit card issuers and credit unions offering assistance:

  • American Express has a banner on their site offering help to their card members facing financial difficulties as a result of the shutdown. Customers who need assistance should reach out to their American Express customer care professionals via their mobile app or chat, or call the number on the back of their card.
  • Bank of America has a dedicated site to work with customers on fee refunds, waivers, repayment plans, and loan modifications. Contact them at (844) 219-0690 or visit your local branch.
  • Capital One has asked their customers to call them and has extended some loan payment due dates.
  • Chase Bank has a special phone number—(888) 356-0023—for impacted customers who may need a credit line or mortgage assistance.
  • Citi provides a dedicated site with contact numbers to offer assistance to customers who are experiencing financial hardship.
  • Citizens Bank has launched a dedicated government shutdown line for its impacted customers to call: (866) 991-0404.
  • Democracy Federal Credit Union is offering a short-term emergency loan with 0% interest, loan extension or deferment, and free financial counseling for customers on its website. You can also call (800) 742-5582.
  • FedChoice Federal Credit Union offers several relief options for mortgage and banking customer on its website that include short-term, low-interest furlough loans and mortgage refinancing options.
  • Navy Federal Credit Union is offering a 0% APR loan up to $6,000 for some customers affected by the shutdown. You can register on Navy Federal's website, in branches or by phone at (888) 842-6328.
  • PNC Bank has asked customers to reach out directly for assistance by calling (888) 762-2265.
  • USAA is offering loan and other relief to impacted customers on its website. You can also call (800) 531-8722 for assistance.
  • U.S. Bank says it will assist customers who may be eligible for mortgage relief programs, including loan forbearance and deferred first payment dates for new mortgages. Payment plans may also be available for those who qualify. Call their customer service line at (877) 760-6046.
  • Wells Fargo is offering forbearance and other payment assistance programs to its mortgage clients on a case-by-case basis. You can call (888) 219-9739 or visit the Wells Fargo website to get more details.

Where Federal Employees Could Be Impacted the Most

According to data from the Bureau of Economic Analysis (BEA), the Washington, DC, market is home to the most federal employees, accounting for about 15% of federal workers in the U.S. The DC market has what is considered a "good" average FICO® Score of 714, and people in this market averaged 3.2 delinquent accounts over the history of their accounts, according to Experian data. Needless to say, these numbers could change as workers struggle to keep up with payments after not receiving regular paychecks.

Federal workers nationwide felt the pain, however. The number of federal employees who filed for unemployment during the shutdown more than doubled in the second week of January—from 10,500 to 25,000—according to Department of Labor data. For comparison, only 1,700 federal workers filed for unemployment during the same time period last year. Looking at the first two weeks of 2019, a total of 35,873 federal workers filed for unemployment, according to data from the Department of Labor. That is more than 12 times the number of people who usually apply for unemployment during that period.

How to Prepare for Future Setbacks

Take the following steps to prepare for future unexpected financial setbacks.

  1. Set up an emergency fund. If you don't already have an emergency cash fund, open a savings account at your bank specifically for this purpose. You can have a small portion of your paycheck direct-deposited into this account to help build some security in case you need it.
  2. Maintain a clean credit report. Having a clean credit report and good credit score before an emergency can help you get approved for a loan if you find yourself caught in another shutdown. You can see your free FICO® Score and get a copy of your free credit report at the Experian website.
  3. Pay down your debt. While it sounds easy enough, it can be hard to start paying off those balances. Find out how much you owe, then decide how much more you can start putting toward your total debt amount. If you're struggling with multiple credit payments, you may want to consider a debt consolidation loan.
  4. Trim your costs. To make your paycheck go further and help you avoid dipping into your new savings, consider ways you can cut your monthly expenses.

While federal employees face serious financial challenges due to the government shutdown, contacting creditors who are willing to help and preparing for the possible next financial challenge can help put you on a better path right now.

Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.

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