If you struggled to pay back your loans over this past year, deferred payments were a welcome relief. Student loans, car loans and housing payments stretched your paycheck to its limit. By placing these obligations on hold, you were able to take a breath and readjust to changes in your life.
But if you look at your credit report, you may see that your lenders reported your deferred payments. You now have several months of marks showing that you temporarily stopped paying your bills. Will this hurt your score?
How important is a credit score?
Credit scores have a significant impact on our lives. Before we make any major purchases, lenders investigate our history, ensuring that we don’t have any black marks that would affect our ability to pay. The overall score and any specific issues reported can limit the type of cars we drive and the homes where we live.
When this rating is so crucial to the lifestyles we choose to live, a low score can prevent us from purchasing the things we need. And late payments, missed payments and bankruptcy can all push this important number further and further down.
Deferments show up on reports
If you deferred any of your loans, your lender will report this to credit bureaus. However, the mark shouldn’t have any effect on your score. Agencies do not consider deferred payments to be the same as late payments. You can pause your loans during a financially unstable time without worrying about your credit once you decide to start pursuing new purchases.
What if a lender reports the payment as late?
If you applied for a deferment and your lender reports your payments as late, you will need to take action to correct your report. Your lender may have made a mistake in reporting. Or your deferment may not have taken effect before your payment was due.
Whatever the reason for an incorrect report, acting quickly will ensure you can clear your credit history. Your lenders have a duty to provide accurate information to the credit agencies. By staying on top of their reporting, you can ensure their actions don’t limit your lifestyle.