Managing Your Credit Through Financial Hardship

Blog Post05/26/2020
Credit Advice Financial Hardship
Managing Your Credit through Financial Hardship

COVID-19 has impacted lives all around the world, causing uncertainty in many parts of life. While we all continue to navigate this unprecedented situation, we want to assure you that we at TransUnion are committed to helping you understand how to protect and stay in control of your credit health during this time.

Our comprehensive guide here provides more information about how to protect your credit health, talk to your lenders and add a consumer statement to your report.

How you can protect your credit health

We understand that you may be facing some tough financial choices right now. We encourage you to pay what you can to avoid late payments on your credit report. If you can’t make minimum payments, we recommend you talk with your lenders to find out if they’re offering any assistance.

The Consumer Data Industry Association (CDIA), which represents the credit reporting agencies nationally, has provided guidance to lenders about how they can help give people a break on their credit during this difficult time. Read our tips on how to talk to lenders about financial hardship below.

You can also manage and stay in control of your credit health by:

  • Checking your credit report regularly. Your credit report tells your financial story to anyone who sees it. It’s important to make sure the information that appears is accurate, especially if you’ll be contacting your lenders to discuss your financial situation and accounts. TransUnion is pleased to offer you free weekly credit reports online through April 2021 so we can help support you through this difficult time.
  • Adding a consumer statement to your credit report. A consumer statement is a note that explains your financial situation and can be seen by anyone who views your report. This note needs to be 100 words or fewer (200 or fewer in Maine). When adding a consumer statement to your TransUnion report, you can easily choose from pre-worded options like, “I am unable to make timely payments due to the impact on my job/wages as a result of the COVID-19 pandemic,” or you can write your own. Visit transunion.com/disputes to get started.
  • Using free tools to help you keep track of any changes to your credit information and give you peace of mind. TransUnion offers a free credit protection product called TrueIdentity, which offers credit monitoring and alerts, your TransUnion credit report and credit lock.

How to talk to your lenders

Though not all lenders offer hardship or forbearance options, the CDIA has provided guidance to lenders about options for helping people during the coronavirus outbreak.

  • Contact your lender and explain your situation. You’ll find their contact information on your credit report or most recent bill.
  • You can ask when your lender reports late or missed payments to the credit reporting agencies. Some lenders may report late payments immediately, and others may wait up to 30 days.
  • Consider asking your lender whether they offer their customers hardship or forbearance plans. These questions might help you in your conversation with them:
    • Does your company offer a forbearance/hardship program?
    • What are the criteria to apply for forbearance or hardship?
    • Is there a difference between forbearance, deferral or hardship?
    • How long does it take for a forbearance/hardship to take effect?
    • Will fees (i.e. late, overdraft) be assessed while I’m in forbearance/hardship?
    • How is interest being calculated while I’m in forbearance/hardship?
    • How is my account reported to the credit bureaus while I’m in forbearance/hardship?
  • Find out how your lender will report your accounts to the credit reporting agencies.

How lenders may report your accounts during financial hardship

After talking to your lenders about your situation, you may learn that they will place your accounts in forbearance/hardship or deferral. These are common methods lenders use to report accounts to the credit reporting agencies.

Having an account in forbearance usually means your lender has agreed that you can temporarily stop making payments on that account for a certain amount of time.

A deferred account means the lender has agreed that you can delay payment for a certain amount of time. Usually, this will show up on your credit report in the Remarks field with a comment that says “Payment Deferred.”

If you’re curious how your credit score will be impacted by an account in forbearance/deferral, check out the VantageScore or FICO websites for more information.  It’s important to note, a credit score is based on many factors in your credit report and different scoring models use different methods to calculate credit scores.

We know many people are feeling anxious about their finances during this challenging time. Organizing your credit information and maintaining communication with your lenders are two ways you can help stay in control of your credit health during times of uncertainty. In the meantime, TransUnion is here for you. We’ll continue to provide updates, tools and resources to help you keep your credit on track.

Disclaimer: The information posted to this blog was accurate at the time it was initially published. We do not guarantee the accuracy or completeness of the information provided. The information contained in the TransUnion blog is provided for educational purposes only and does not constitute legal or financial advice. You should consult your own attorney or financial adviser regarding your particular situation. For complete details of any product mentioned, visit transunion.com. This site is governed by the TransUnion Interactive privacy policy located here.

What You Need to Know:

There are various types of credit scores, and lenders use a variety of different types of credit scores to make lending decisions. The credit score you receive is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.

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