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Mortgage

Will a Mortgage Deferment Hurt My Credit?

Dear Experian,

Are mortgage payments being deferred? If so, do you still have to pay on time? If in deferment, does that affect your credit score?

- SIJ

Dear SIJ,

We know many consumers may already be struggling to make their mortgage payments as the COVID-19 pandemic continues to impact the economy. Currently, you will need to contact your lender and ask them whether they are offering payment accommodations, including forbearance or deferment options for those who have been financially impacted. If you have a federally backed mortgage loan, you have a right to request a forbearance for up to 180 days.

How Will My Mortgage Account Be Reported?

Additionally, the credit reporting agencies (Experian, TransUnion and Equifax) have in place a crisis response plan that enables lenders to report your account in forbearance or deferment using a special code that indicates the account has been affected by declared disaster.

When your account is reported by your mortgage lender as in deferment or forbearance, it won't negatively impact your credit. Account information that is reported by lenders to credit bureaus as required by the Coronavirus Aid, Relief and Economic Security (CARES) Act will not cause consumer credit scores to go down.

Contact Your Lender Before You Become Late

If you are in danger of not being able to make your mortgage payment, contact your lender before you miss the due date. Explain your situation and ask what options are available to you.

In the meantime, you should continue to make your mortgage payments on time if at all possible. Late payments remain on your credit report for seven years, and even one past-due mortgage payment can substantially impact your credit scores.

Reaching out to your lender before you become delinquent puts you in the best position to take advantage of any help that may be offered.

Understand the Terms of Your Forbearance or Deferment

Be sure to request a copy of the agreement you make with your lender, as it's important to fully understand the terms of agreement and have it on hand to refer back to. Your agreement will also explain whether interest will continue to accrue while your account is "on hold." Your account may not accrue interest in deferment, but a forbearance status may increase the amount you owe because interest may continue to accrue while payments aren't being made.

Finally, you'll want to plan for how you will begin repayment once your deferment period ends. Even though you may not be able to make full payments at this time, any money you can set aside towards your mortgage now can help ease the transition once you resume making those payments.

Thanks for asking.
Jennifer White, Consumer Education Specialist

This question came from a recent Periscope session we hosted.