This is tough to know right now because data is still being gathered and in some cases being reported differently since credit reporting agencies have different types of models and scoring methodologies.
Because COVID-19 is such an unprecedented event, there is a lot of work being done to figure out how different situations should be treated and reported, which impact credit scores. But there are a few things that I think consumers should be aware of:
- The Fair Credit Reporting Act or FCRA is a law passed in 1970 that gives consumers certain rights when it comes to their credit reports including the ability for consumers to dispute credit reporting errors when those occur. It also requires that “furnishers” (those that produce credit reports) report accurate and up-to-date information.
- Consumers that are impacted by COVID-19 can receive loan accommodations without having their credit score impacted. When Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020, part of it ensured that consumers that are impacted by COVID-19 can receive loan accommodations without having their credit score impacted. This means that when banks and lenders provide loan payment deferrals and other forms of relief to consumers due to COVID-19, it should not negatively impact their credit score.
We currently know that many American consumers are heavily impacted by COVID-19 and have received payment deferrals from their banks or lenders. While these deferrals should not affect their credit score, there are different credit reporting agencies and different credit scoring models (this is why you may have a slightly different score when you go to different credit agencies). The current challenge is to make sure these loan payment deferrals are being treated consistently. Otherwise, it is difficult to fully understand how credit scores will be impacted.
As a consumer, you have the right to view your credit score and these days, many fintech companies and banks have made that both easier and free to do. It’s a good idea to check your score regularly and make sure you contact your credit reporting agency if you notice anything inaccurate - especially if you’ve received a loan payment deferral due to COVID-19.
I would recommend this resource from the Federal Reserve Board division known as the Division of Consumer and Community Affairs tasked to do ongoing research on these topics including conducting ongoing surveys to understand the financial health of American households.
In addition, the Consumer Financial Protection Bureau (CFPB) has a helpful blog to help consumers navigate potential credit score issues during this time.
Finally, credit scoring agencies, fintechs, and lenders are increasingly applying alternative data to make lending decisions. Kaitlin Asrow from our team covers this in further detail here.