Everyone has those important numbers in their lives … Social Security numbers and pins, phone numbers and credit scores. But, would it surprise you to know that nearly 40 percent of Americans do not know their credit score? It affects so many aspects of our lives, especially when it comes to lending. Whether you are applying for a new credit card or a mortgage, your credit score can affect if you are approved or not. The Coronavirus Pandemic has affected every aspect of our lives and credit scores are no different. Here to talk about how the COVID-19 affects credit scores and mortgages is Robert Brown, Loan Officer, Rock Mortgage.
Do you think that people have taken actions during the Coronavirus Pandemic that have negatively affected their credit scores?
COVID-19 has wreaked havoc on almost every aspect of our lives, including our credit scores. What I do is help people get mortgages to fit their lifestyles so they can purchase their dream homes. A credit score is a huge piece of our collective success. I found a recent survey from Bankrate to be very interesting. It states that one-third of U.S. credit cardholders have done at least one thing since the start of the Coronavirus outbreak that could potentially hurt their credit score. Most have added to their debt or paid a bill late. These activities all cause your credit score to go down. The lower your credit score, the less likely you are to find favorable mortgage terms.
What should people do to protect their credit score?
Whether you are considering purchasing a home or are already a homeowner with a mortgage, don’t be afraid to ask for help. This should not be an ego thing. Whether it be a credit card payment or your mortgage, if you are unable to make even the minimum payment, contact your lenders and creditors and see if any assistance is available. If possible, pay what you can. Try to avoid late payments. And, try to make at least the minimum payment on accounts, or pay any amount you and the lender or creditor agree upon. Another thing to do is to stay up to date on your credit reports. You are entitled to a free copy of your credit report every 12 months from each of the three nationwide credit bureaus (available at www.annualcreditreport.com). Consider adding a consumer statement to your credit reports. You can add a brief 100-word statement to your credit reports to explain your financial situation. These are just some quick, but very meaningful ways you can help your credit score remain intact.
For current homeowners with mortgages, how might deferred mortgage payments or missed payment allowances be reflected on credit reports?
Many homeowners have entered into forbearance plans. Forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later. As of June 21, there are already 4.2 million mortgages in forbearance, or 8.5 percent of all mortgages, according to the Mortgage Bankers Association. The CARES Act provided some protections for negative credit reporting on mortgages. Under the CARES Act, if you have a federally backed mortgage, you can ask for an initial forbearance of up to 180 days. If additional relief is needed, you’re entitled to a 180-day extension. Interest still accrues, but fees and penalties are waived.
A big protection for your credit score is suppressing negative reporting on a COVID-related forbearance. If you are considering entering into forbearance, try to not be behind on your payments because creditors are required by law to report your account as current to credit bureaus. However, if you are 30 days late, for example, that status would be reported to the credit bureaus, essentially freezing you at that credit status.
If you’re out of work or struggling due to the pandemic, contact your lenders and creditors to explain your situation and see if any accommodations can be made.
Whether or not a person is a current homeowner with a mortgage or in the market to purchase a new home, if their credit score may have been negatively impacted by COVID-19, what should they do?
If you are an existing homeowner, call your lender and ask them what leniences, relief or options best suit your financial picture. It may be forbearance, or it may be refinancing. Every situation is different.
If you are considering purchasing a home, a good first step is to get pre-qualified. To do this, contact a trusted mortgage lender. They will be able to tell you what your best mortgage options are given your credit score and other factors.
You are only as strong as your team, so make sure you pick a mortgage lender that you can work well with. Every situation is different and you want to get a knowledgeable lender who will support you and guide you through the process to find the right mortgage for your specific situation. Feel free to contact us at Rock Mortgage with any questions. Now more than ever, our team is committed to supporting our community in any way possible.
For more information, visit www.rockmortgagelending.com or call 479.321.3355