As the number of coronavirus cases increases, it is also having a negative impact on the financial health of the economy at large and the economic well-being of individuals across the United States. The unusual nature of this pandemic has resulted in the temporary closing of schools, cancellation of events and disruption of the distribution of goods and services that may have the unintended consequence of impacting some people’s ability to pay bills on time.
If you are one of these impacted consumers you may be wondering:
- What will happen if I miss payments on my credit cards and loans?
- How might this affect my credit rating and access to credit in the future?
These are important questions to consider because your FICO® Scores influence the credit available to you as well as the terms, such as interest rates and amount of credit extended. To be clear, medical conditions or diseases are not considered by FICO® Scores and will not directly impact a FICO® Score. However, the potential financial “fall out” of missing a payment, charging credit cards up to and over their limit or opening several new credit accounts over a short period of time can have a negative impact on your scores.
So, what should you do to help yourself and monitor changes to your FICO® Scores if your financial situation has been impacted by coronavirus?
Before bill payments are due, you should contact your bank and other creditors as soon as possible to make them aware of your situation. Your lender will likely have procedures in place to work with customers impacted by this unique health emergency. In fact, several federal and state regulators have already issued guidance to lenders encouraging financial institutions to work constructively with affected consumers, small business owners and communities.
For example, your lenders may work with you to increase your available credit, set up a temporary deferred payment plan, or temporarily place the loan in forbearance (meaning you may get temporary relief from having to make full payments on your credit obligations). The placement and reporting of an account in forbearance or a deferred payment plan in and of itself does not negatively impact a FICO® Score.
Each lender is likely to have their own unique policies, so if you have loans from different financial institutions, you may want to contact each of them to cover all of your bases.
Given the broad and unprecedented nature of this pandemic, financial service providers may update or revise their policies and practices depending on how the situation evolves. It’s in your best interest to stay informed as you manage your credit health through the coronavirus outbreak.