How the CARES Act Affects Credit Reports and Scores

How the CARES Act Affects Credit Reports and Scores article image.

As part of the recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act, the federal government put in place special protections that change the way some creditors report information to credit bureaus. These changes can protect consumers who have been impacted by COVID-19 and have made agreements with their creditors to modify their normal payment schedule in some way.

Payment history is the most important factor in your credit scores, so try to do all you can—including taking advantage of government protections—to keep late payments off your credit reports. Read on to learn what the law requires and which CARES Act protections could apply to your situation and help your credit reports and scores.

Credit Reporting and Scores Under the CARES Act

In response to the unprecedented financial impact of the COVID-19 outbreak, many lenders have developed relief options that give consumers wiggle room if they are unable to make their regular payments. To protect consumers against being reported as delinquent if they utilize these options, the CARES Act calls for creditors to adjust how they report accounts that have been modified.

The law requires creditors to report any account that has a payment accommodation applied to it as current to the credit bureaus—as long as the account was current when the accommodation was made. Here are two scenarios you could experience under the CARES Act:

  • If your loan is considered current (not past due) at the time you make an agreement with your creditor to modify repayment, the creditor needs to report to the credit bureaus that you are current on your loan.
  • If your loan is considered delinquent (past due) when you make an agreement with your creditor, your status will continue to show as delinquent until you bring the account back into good standing. Once you bring the account current, the creditor must report your status as current to the credit bureaus.

According to the new law, an "accommodation" could be an agreement to make partial payment, to put a loan in forbearance, to modify a loan or to offer any other relief.

The CARES Act protections require creditors to follow these guidelines for all agreements made between January 31, 2020, through either July 25, 2020 (120 days after March 27, 2020, when the law was enacted), or 120 days from the date the COVID-19 national emergency is declared over.

If you're unsure about your specific arrangement and want to know whether you're protected by these requirements, contact your lender and ask how they plan to report your information to credit bureaus. Make sure you document all your interactions by taking notes and screenshots and saving emails, so if your lender fails to follow through, you'll be prepared to dispute them.

How to Protect Your Credit During the COVID-19 Crisis

While maintaining your credit score is important, remember that credit can fluctuate, and if your scores are impacted now, they can still bounce back later. If your finances have been affected by COVID-19 and you're worried about your credit, here are a few tips that may help you protect your credit score:

  • Pay your bills on time if possible. If you have the means, try to pay all of your bills on time to avoid having any delinquencies recorded in your credit reports. Unless you have a special arrangement with your creditor, late and missed payments may still get reported to credit bureaus. The best defense against letting that happen is doing what you can make payments on time, even if you're only making the minimum payment the lender requires.
  • Contact your creditors and service providers to see if they can help. As mentioned, many lenders and service providers are providing relief to people impacted by COVID-19. If you fear you won't be able to pay a bill, contact your creditor or service provider immediately to see if there are any options that might help, such as loan forbearance. It's important to contact them before missing a payment, as some relief options may not work retroactively.
    If you take advantage of a relief option, the agreement you make with your creditor might include protections for your credit score. Make sure to discuss this with your creditor.
  • Monitor your credit regularly. Checking your credit can give you peace of mind and can help you see if your score has gone up or down. Remember that credit scores fluctuate often, so if your score drops, it could recover over time. Experian's free credit monitoring service allows you to check your Experian credit report and FICO® Score regularly to see where you stand.
  • Seek financial assistance. If you feel overwhelmed by the idea of budgeting and paying down your debt, consider contacting a credit counseling agency that can help you devise a plan to repay your debts. Nonprofit credit counselors can help you come up with a plan to manage your debts including. Contact the National Foundation for Credit Counseling to find a reputable counselor near you.

Preparing for a Positive Financial Future

While the current crisis may be putting a strain on your finances, know that credit scores fluctuate often, and nothing you do today will ruin your credit forever. Taking what steps you can now to manage payments, work with your creditors and seek additional help if you need it will help you prepare for a strong financial future.