The direct effects of the COVID-19 pandemic continue to impact Americans. As the economy continues to slide, many are wondering about the ramifications the current climate will have on their finances. What we already know is that the economic outcome is bleak. And, while it’s well-known that efforts are underway to halt an impending recession, many might not be aware that steps are also being taken to protect them from a potential coronavirus credit score impact.
Bill to Reduce Negative Coronavirus Credit Score Impact
Last week saw the Senate introduce a bill designed to protect credit reports from the adverse effects of the coronavirus pandemic. This legislation would mandate that negative information can not appear on a credit report for at least four months. “During these uncertain economic times, Americans shouldn’t have to worry about their credit scores as they work to make ends meet,” Senator Sherrod Brown (D-OH), the bill’s author, said in a statement.
How effective this legislation will be is up for debate. Similar legislation is being discussed in the House of Representatives, but the success of either bill is questionable. That’s because lenders rely on credit reports to show how risky an applicant is, and any delay in information can allow fraudsters to abuse the system.
Always Read the Fine Print
Should these bills fail, what can consumers expect in the coming months? While some credit card issuers and are already offering some relief, more needs to be done from lenders. According to credit expert Al Bingham, “in the next couple of weeks, we’ll see what lenders decide to do.”
One thing Bingham does know, however, is that Americans need to be careful when agreeing to new terms with any lenders. During the previous economic downturn – the 2008 recession – some lenders allowed consumers to skip payments. And while that doesn’t sound bad, those skipped payments were classified as missed payments. That, in turn, severely damaged credit scores for thousands of Americans.
“Anything that changes your payment agreement — whether a forbearance or modification — they have a right to put it on your credit report,” Bingham told CNBC. His advice? Be careful when agreeing to any forbearance or loan modification plans – and always read the fine print.
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