Does the Federal COVID-19 Stimulus Include a Credit Report Moratorium?

COVID-19 has hit economies across the globe hard, and it’s impacting the wallets of millions of Americans. From reduced hours to lay-offs, Americans are looking at the potential for lost income in the coming months. The federal government responded in March 2020 by passing a 2 trillion dollar stimulus package to provide some relief.

Originally, the package included a credit report moratorium. That would have helped safeguard consumer credit scores during this time. But that protection fell by the wayside. Find out what happened to the potential credit report moratorium and what protections you can turn to instead.

What Happened to the Credit Report Moratorium?

The credit report moratorium was part of the same stimulus bill that ensures many Americans will receive a check during the upcoming weeks. Originally, the credit report moratorium would have required credit bureaus to cease listing negative items temporarily. The proposed time period was four months.

If the moratorium had passed, it would have meant any missed payments or other credit issues in the next few months wouldn’t make it on to your credit report. The concept behind the moratorium was to protect consumers who couldn’t pay bills due to COVID-19 income losses.

However, according to news reports, financial lobbyists and others convinced legislators to pull this from the stimulus act. One reason given for this is that it would create an incomplete credit profile that could lead to complications in the future.

At the time, the government is leaving it up to creditors to protect consumer interests during this time. Credit bureaus have noted that negative items reported during this time will be coded with a special modifier that lets future creditors know they were made during a disaster. This is the same type of coding that is used during natural disasters.

What Are Some Protections That Did Make It Into the March 2020 Stimulus Package?

Some protections did make it into the stimulus package. Homeowners with a federally backed mortgage get some protection from the Coronavirus Aid, Relief, and Economic Security Act. Foreclosures on these mortgages are suspended for 60 days following March 18, 2020. That means mortgage lenders cannot proceed with existing or new foreclosures during this time.

If your loan is federally backed, you may also be able to receive a 180-day forbearance. You have to contact your lender to request this. If it’s granted, you don’t have to pay your mortgage during that time and won’t incur fees, fines or additional interest outside of existing scheduled interest. The CARES Act also provides you the right to ask for a second 180-day extension if it’s financially necessary.

Individuals who rent properties from companies or individuals who participate in covered housing programs also have some protection. The government has issued a 120-day moratorium on evictions from these properties.

What Can Consumers Do to Protect Their Credit During This Time?

The Consumer Financial Protection Bureau notes that it’s important to continue paying your mortgage, rent or other bills if you’re able. However, if you can’t make regular payments because you’re faced with income loss due to COVID-19, contact your lender as soon as possible.

There’s not, at this time, a moratorium on all negative credit reporting. But many lenders are working with borrowers and are willing to be flexible about providing longer grace periods or allowing missed months without penalties or negative reporting.

It’s also a good idea to start monitoring your credit regularly or at least check in to see where you stand. Start with Credit.com’s free credit report card. You’ll get your current credit score and see exactly where you stand on the five major factors that drive your score. That helps you understand how financial issues might impact your credit score over the next few months.

And if you’re going to work with a creditor to make different payment arrangements, you probably want to watch your report regularly. If they agree to let you skip a payment, make sure you get it in writing. If you see that they report a late payment on your credit report in error, you can dispute it as inaccurate.

Several lawmakers have said they’ll continue to push for credit reporting relief for consumers during this crisis. However, it’s not a good idea to count on a potential credit report moratorium to keep your report clean.

Instead, get organized now. Create a realistic budget based on your current income if you  have one. If you don’t have one, then, create a worst-case-scenario budget you might follow if you lost your job.

Gather all your creditor information so you can reach out to discuss relief options as soon as you know you might need it. Communication and a proactive approach can help you protect your credit for the future.

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