During a pandemic, your credit rating may have dropped: why it happened and how to fix it
A record number of complaints about errors in credit reports go to the credit monitoring bureau, according to a consumer group, and the pandemic is to blame. Yahoo.
Consumers pay the price for these mistakes - credit ratings fall. But it's not too late to defend yourself - and if your rating has dropped, you can fix it.
Why is this happening
Last March, the law that provided for the very first financial aid payments in connection with the coronavirus also ordered persons servicing federal mortgage and student loans to allow borrowers to suspend payments.
Meanwhile, credit card issuers and car loan providers have voluntarily offered deferred payments to their customers. Americans, struggling to pay their bills during the COVID economic crisis, willingly decided to take breaks in their payments on loans and credit cards.
A few days after the bailout bill was signed, the Consumer Financial Protection Bureau (CFPB) issued a statement instructing companies to report that consumers “took action” on their loans even when they took advantage of relaxed payment schedules.
The problem began when some lenders and credit providers mistakenly reported missed payments as “late” to the credit bureaus Equifax, Experian and TransUnion, whose credit reports are used to calculate consumer credit scores. And people who paused their payments soon saw their scores drop.
The problem became so widespread that class action suits against credit card issuers and other financial companies began to appear in the courts of New Jersey and Washington.
Flash of errors
In 2012, the Federal Trade Commission conducted a study on common mistakes in credit reporting. The agency found that one in four people had at least one mistake in their credit reports.
Now the pandemic has caused this problem to increase. Since April 1 last year, the CFPB has received about 280 consumer complaints about credit reporting - a record high, and 000% more than a few days before the pandemic officially started, according to the consumer advocacy organization US Public Interest Research Group.
“Consumers have every right to be angry with credit bureaus,” says Ed Mezhvinsky, senior director at US PIRG.
Errors in your credit reports can have long-term consequences for your credit rating and finances in general.
According to Equifax, the negative information will remain on the credit report for seven years. This means that through no fault of yours, you could have trouble getting a mortgage or car loan, student loan, cell phone, or even a new job - for most of the next decade.
How to know if this happened to you
Many people who have credit report errors and damaged credit ratings may not even be aware of it.
When was the last time you checked your credit score?
The CFPB recommends doing this at least once a year, but if you have a major purchase ahead of you, it's best to check your result immediately. Keep in mind that if 25% of the population already reported bugs prior to the pandemic, there is a good chance that one of your credit reports has a mistake, especially if it has been a long time since you checked your credit rating or reports.
If your score drops and you find any discrepancies in your credit report — for example, a deferred payment marked as “late” —you want to challenge them with the credit bureau. If you don't get your way, you can file complaint to CFPB.
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What else can you do
Now that the mortgage grace period has been extended to 18 months and student loan payments have been suspended until September, you have plenty of time to get back on your feet and maintain your credit rating. (That is, to rule out any new errors in the credit report.)
If you are worried about how you will deal with these accounts after you resume lending, refinancing to lower interest rates can save you hundreds of dollars a month and make your payments more manageable:
- Refinancing a mortgage. When was the last time you refinanced your mortgage? If more than a year has passed, then you are overdue. Rates remain historically low, so refinance your existing mortgage and get big savings. Mortgage technology and data provider Black Knight estimates that about 16,7 million U.S. homeowners can cut their monthly home payments by an average of $ 303 through refinancing.
- Refinancing a student loan. The latest data from the Federal Reserve shows that 31% of the US adult population takes on some of the education debt. And in 2019, the average borrower still owed between $ 20 and $ 25. Refinancing your student loan can help you pay off your debt several years earlier and make payments more affordable.
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