Is Your Credit Report Accurate? Don’t Count on It

Photo to accompany story about if your credit report is accurate. Getty Images / Rob Kim
NextAdvisor Contributing Editor Farnoosh Torabi looked into record-setting complaints made to the credit monitoring bureaus in recent months.

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People are complaining about credit monitoring bureaus in record numbers this year.

You might also have to register a complaint, and here’s why.

In the wake of Covid-19, the CARES Act assured borrowers that if they made an automatic or voluntary “arrangement” with their lender to defer or skip payments due to pandemic-related hardship, it would not go down as a stain on their credit report. Think: forbearance, deferred payments, a partial payment plan or any other Covid-related financial relief.

Assuming your account had been in good standing prior to the deal, the lender must report your account as “current” to the major credit bureaus, according to the law. That way, you’ll protect your credit score and your access to credit in the future. But it’s not all going to plan, and now borrowers are voicing concerns.  

Credit Complaints Are Rising

Source: Analysis of data from the Consumer Financial Protection Bureau by US PIR and the Frontier Group.

Since the pandemic began, complaints to the Consumer Finance Protection Bureau (CFPB) have surged by 86%. The “record numbers” are driven by problems with credit reports, says Ed Mierzwinski, senior director at the U.S. Public Interest Research Group, who’s been following the issue closely. Specifically, he says there have been hundreds of complaints with narratives mentioning the terms “pandemic” and “incorrect information” over the past seven months.

In Texas, a resident contends that a lender approved the request to defer payments “due to being impacted by [the] COVID-19 pandemic,” only to then discover that their debt had been reported as “delinquent.” 

“This is unfair and inhumane treatment,” the complaint reads. 

In New York, a student loan borrower alleges a similar problem, and in Pennsylvania, another consumer mentions how the lender agreed to put his or her loan in forbearance and said the account “should not be reported as late due to disaster forbearance.’ And yet, according to the claim, it was. 

All this serves as an important reminder that as we work to keep our finances in shape, we need to vigilantly protect our credit, too. Especially now when historically low interest rates could allow for cheaper financing and lenders are cracking down on their borrowing standards. 

Even if you’re not in the market for credit now, you don’t want to realize these mistakes months or years down the road when they’re only harder to trace and fix.

Here are some additional reminders from credit experts, particularly if you are enrolled or plan to enroll in a loan modification related to the pandemic.

1. Know How Your New Payment Plan Works (Really)

Before you sign on to any payment plan offering pandemic relief, understand how it will work and what will be expected of you in order for your account to remain in good standing.

For example, not all deferment plans are created equal. 

A “90-Day Deferment with Loan Term Extension,” means that after the program ends, your monthly payment resumes but the lender will extend your loan by three additional months.  A “90-Day Deferment with Lump Sum Payment,” on the other hand, means that after 90 days you have to pay the deferred amount as a lump sum, plus the payment owed for the current month.

“It’s critically important to understand these payment plans are not intended to be permanent or ‘freebies,’” says Tom Quinn, vice President of Scores at FICO.  “The time to discuss the program’s payback structure is now when you are applying for the program and not when the program ends.”

2. Get the Lender’s Promise In Writing

You also want to be sure to keep the lender or credit issuer accountable to the “arrangement,” and the best way is to have a strong paper trail that states they will report your account as “current” to the credit bureaus. This will come in handy in case you need evidence to correct a mistake on your credit report. 

“If you reach out to your issuer by phone, document the time, whom you spoke to and the terms of the agreement. This might not be ‘official,’ but it still might show the credit bureaus that you made a good faith effort to obtain an accommodation and understand the terms,” says Beverly Harzog, credit card expert and consumer finance analyst for U.S. News & World Report. “Some issuers are allowing hardship requests online. In this case, take screenshots to show your request and the responses,” she adds.

3. Check Your Credit Well and Often

“The only way you’ll know if the lender is reporting you as being current is to check your credit reports,” says John Ulzheimer, credit expert, formerly of FICO and Equifax. 

You can now check your credit report for free much more frequently, up from once every 12 months to once per week at annualcreditreport.com. The increased access will be in effect at least until April 2021. 

“I’d strongly advise you check your reports at least once per month to ensure your lenders are all reporting you as being current,” says Ulzheimer.

As for your score, you can also look that up online. Some of the major financial institutions now provide consumers with free access to their FICO Score and/or VantageScore, a newer scoring model. To find yours, start by logging into your banking portal and searching the menu or requesting assistance. 

4. Don’t Immediately Freak Out

What if your new payment plan winds up misstated on your credit report? Does it automatically mean that it could hurt your score? Not always. 

“Some of the reporting could be benign and some consumers are going to have credit that’s already so bad that it can’t really get incrementally worse,” says Ulzheimer.  

FICO’s credit scoring models don’t register forbearance and deferment reporting as a negative. And VantageScore has made recent changes to their latest algorithms to reduce the potential of any harsh impact linked to those terms. But other terms, like “delinquency,” or “late” can really sting. 

“Depending on the misinformation reported, it could negatively impact your credit score,” says Quinn. 

By how much is not totally clear but prepare for minimum double-digit declines for even one “delinquency” on an otherwise clean bill of credit health.

5. File a Dispute If Need Be. Prepare to Wait

If you catch any misreporting on your report, dispute this with the credit bureaus immediately and interact with the lender as well to get it resolved, says Quinn. 

Here’s an article where NextAdvisor’s Alex Gailey breaks down the best way to report an error on your credit report for free, including precisely what to say in your dispute letter to the credit reporting agency.

Note that disputes typically require a 30-day review but it could take longer now with more people working from home and operational disruptions. In a letter, the CFPB says, “the 30-day period may be extended to 45 days if the consumer provides additional information that is relevant to the investigation during the 30-day period.”

It’s not a fun wait, but in times like these, you need to be your own biggest advocate.