Amid the COVID-19 crisis, the government has directed lenders to let people skip monthly payments on many federally-backed loans, without reporting the loans as delinquent or past due. If you need relief, this new policy is good news.
It also means, though, that you should be more alert than usual about monitoring your credit. Lenders or credit bureaus could make a mistake and unfairly report your skipped payments. The result could have a serious impact on your financial future.
Here’s what you should know to stay ahead of the issue.
What’s a credit score?
Let’s start with the basics. Your credit score is a numeric summary of your full credit report. A higher credit score typically reflects a cleaner credit report. A credit score might just be one of the factors affecting your financial health, but it’s the most meaningful one and can impact your options the most.
The score helps determine whether or not you get the apartment you want, what car you can afford to buy, and what interest rates you’re looking at. You can save tens of thousands of dollars over your lifetime if you maintain a good credit score.
What kind of loan program is helping me with payments?
Lenders classify most payment relief programs as “disaster relief,” which translates to a forbearance on your account, a designation that will hurt your credit score. If you need immediate payment relief, look for a payment deferment program instead.
With a deferment, the skipped payments are just tacked onto the end of the term of the loan. So, if you’re scheduled to pay off your loan in January 2021 and you enroll in a three-month deferment, the bank will simply extend your loan through March 2021. Deferment is the way to get temporary relief without hurting your score.
What else should I do to protect my credit?
Pull your credit report. Look out for any inaccuracies that may be hurting your credit score.
Be smart about your credit card activity. Use credit cards that have not been used in over 3 months. Utilization is a major factor in the calculation of your credit score, so make sure your accounts aren’t totally stagnant and set goals to reduce the balance of each credit card to less than 50% of the card’s credit limit.
Perhaps most important, get rid of errors on your credit report!
Tackle inaccuracies and boost your credit score with help from the experts
That’s where our partner Dovly comes in! Dovly’s credit repair solution is simple, transparent, and can make a major impact on your score – 92% of customers experience a 54-point increase in just 6 months.
By automatically disputing the mistakes with all three credit bureaus, monitoring your credit, and updating your score, Dovly takes action to make sure your report is accurate and your score is climbing.
Note: COVID-19 has negatively impacted many jobs and many workers as a result. The credit bureaus are limited on staff, so mailed-in disputes will be delayed. Look for credit repair solutions with electronic dispute capabilities like Dovly that get your disputes processed faster.