Covid-19 and Credit Scores

What is the Impact of COVID-19 on Credit Reports and Scores?

Consumer Credit During COVID-19 and Beyond

The coronavirus pandemic of 2020 has led, for the first time in human history, to the shuttering of the world’s economy and to international trade. Countries have shut borders even to neighboring trading partners while simultaneously closing millions of businesses to contain the spread of the COVID-19 infection.

How has the COVID-19 pandemic affected consumers’ credit reports and scores?

While the pandemic will not affect the way credit scores attempt to predict the consumer’s future debt payment patterns, it has led the major consumer reporting agencies to offer credit reports to consumers every week for free through the end of 2020.

Protecting and Building Your Credit in 2020

Although the coronavirus pandemic has led billions around the world to focus on protecting their health and physical well-being, it has also affected the financial livelihood and well-being of hundreds of millions globally. The loss of income due to the closure of borders and businesses means a noticeably large percentage of consumers have less income to pay their bills. Coupled with the fact that approximately 80% of American households were living paycheck-to-paycheck going into the pandemic and its resulting recession, many consumers immediately began missing payments on their credit card accounts, car loans, and even home loans.

Prioritizing Consumer Credit

While physical health and safety tend to outweigh financial health and well-being in the short run, consumer credit reports and scores will play an important role in the household and national recovery in the coming years.

A poor credit rating does not indicate an individual’s lack of effort or irresponsibility when it comes to paying bills. Instead, a low credit score is based on recent payment histories and information, and it attempts to predict the probability of the individual missing his or her payments in the near future. The score is used by lenders to determine their risk in lending to the individual and how they plan to compensate for lending to higher-risk borrowers.

Lenders will offer low-risk borrowers lower interest rates because they have a high likelihood of being repaid in full in addition to reasonable interest payments. When lenders work with high-risk borrowers, they have a high probability of not being repaid. Consequently, they attempt to counter potential losses by charging these individuals higher interest rates.

Coming out of the COVID-19 pandemic, protecting or rebuilding your credit rating will be an important tool in your household’s financial recovery. Since credit scores are solely based on information found on your credit report, you should focus your credit-building efforts primarily on your credit history. Moreover, since recent activity from your credit history has a greater influence on your score than activity from years ago, there are strategies you can use to rebuild your credit faster without making larger or more frequent payments.

Traditional Access to Credit Reports

Since late 2004, Americans have had the right to access their credit reports from the three major consumer reporting agencies (CRAs, also known as credit bureaus) every twelve months. These reports do not come with corresponding credit scores, but they do list the consumers’ loans, credit accounts, and other debts incurred or being paid over the past seven to ten years.

The website set up for this access was AnnualCreditReport.com. It appeared during a period when for-profit companies were bombarding consumers with ads to get their credit reports at various other sites, even baiting them with so-called free trials that more often than not seemed to trap the consumers in expensive, long-term credit monitoring contracts that were hard to cancel.

More than a decade and a half later, many consumers still are not aware of their right to get a free, no-strings-attached credit report at AnnualCreditReport.com or its corresponding toll-free telephone service at 877-322-8228.

2020 Access to Credit Reports

On April 20, 2020, the CRAs jointly announced their response to the COVID-19 pandemic by providing increased credit support to American consumers. For the remainder of 2020, they would all offer consumers free access to their credit reports through AnnualCreditReport.com each week of the year.

While some consumers called for the CRAs to change their credit score models to reflect the difficult situations so many households were undergoing, such calls indicated the unfamiliarity of many consumers with the roles of CRAs and the purpose of credit scores. Unfortunately, many consumers believe their credit ratings somehow reflect personally on themselves, tying low scores to irresponsibility and high scores to financial success. Neither indicates a valid understanding of credit ratings.

Changing the credit scoring model to improve the scores of those undergoing the financial difficulties of the pandemic might make the consumer feel better about themselves, but it would destabilize the entire credit industry. Changing the scoring model would mean it was no longer a valid indicator of credit worthiness, leading potential lenders into great uncertainty. As a result of this greater uncertainty, lenders would be forced to increase their interest rates across the board in order to address the higher risk the were now at for lending to those with unknown levels of risk.

Traditional Access to Credit Scores

Contrary to popular belief, consumer credit scores are not held in some vault or on a database, waiting for lenders and consumers to view them. Instead, they are generated based on the consumers’ credit history at the time the score is requested. Information on your credit report can change daily. In fact, since account age is one of the factors in your credit score, you should expect your score to change regularly.

However, if you have wondered why your credit scores through lenders vary so much from your scores available through free services like Mint, Credit Karma, and Credit Sesame, you should be aware you are looking at different scoring models. Over 90% of all lenders consider your FICO credit score when making decisions about whether to lend to you. However, free services like those mentioned above offer credit scores from VantageScore (usually version 3.0 or 4.0). While similar in their intent and even their factors, the FICO and the VantageScore models will almost always produce different scores because they weight the various credit data on your report differently.

Even the credit card companies and banks who advertise that they offer free FICO scores to their customers typically offer FICO scores that are out of date or that are otherwise rarely used by most lenders.

Why are there so many credit scoring models and credit reporting agencies, you may ask? We hear this question often. The best response is to modify the question and ask it again: Why are there so many different car companies? Can’t they just make one car for everyone?

Since credit scores are made for lenders and businesses, not for consumers, each business may have different needs or require different details in their scores based on their approach to lending. Additionally, each of the three credit bureaus believes they can provide better service and products than the other two.

2020 Access to Credit Scores

FICO has not announced any plans to give away its score to consumers during the COVID-19 crisis, nor are we expecting them to. As a consumer, you need to check your credit REPORT regularly to ensure there is no fraud or errors on it. FICO can easily argue that checking your credit SCORE as a consumer serves no purpose beyond fulfilling personal interest and curiosity (although some use it for so-called bragging rights).

That said, checking your credit score on a regular basis can offer you a quick way of staying aware of major or unexpected changes to your credit report. If you check your credit weekly or even monthly and your score suddenly drops or increases unexpectedly, this can be a good indication that there is fraudulent or at least suspicious activity on your report you should investigate.

Daily Credit Scores

These organizations offer you access to your updated VantageScore credit rating every day:

  • NerdWallet.com: Get access to your free credit score whenever you like, in addition to receiving 24/7 free monitoring to know when things change on your report.

  • WalletHub.com: This service offers you a free credit score update every day.

Weekly Credit Scores

Consider signing up for these free services to check your VantageScore weekly:

  • CreditKarma.com: Get your updated credit score once every seven days.

  • CreditWise.com: You do not need to be a Capital One customer to use this free resource that gives you access to your free credit score every week. CreditWise.com also has a nice calculator you can use to estimate what your credit score would be based on changes you plan to make (e.g. pay off balances, take out a loan, miss a payment, etc.)

Monthly Credit Scores

The following free services offer you a look at your VantageScore monthly:

  • CreditSesame.com: Get your updated score each month along with additional services.

  • LendingTree.com: Each month, check your free score with an evaluation that helps you learn more about your potential savings.

  • Nav.com: The only place to get free credit scores from all three of the major consumer reporting agencies, Nav offers you a free credit score along with alerts for credit report changes. Additionally, if you are a business owner, Nav offers free access to your business credit scores.

Immediate Steps for Protecting Your Credit History

The first step to protecting your credit history is to access it. If you have not done so in the past seven days, pull your credit report for free with no credit or debit card necessary at AnnualCreditReport.com. This is a special arrangement between the consumer reporting agencies, due to the COVID-19 pandemic, through the end of 2020. Normally, you can only access your report once every twelve months.

Review your credit report for inaccuracies and accounts you do not recognize. If you see mistakes or potentially fraudulent debts on your credit report, submit a dispute directly through the consumer reporting agency (CRA) home pages (Equifax.com, Experian.com, TransUnion.com). You must dispute the error with each CRA that lists the problem on your report. They do not share error disputes.

A 2018 federal law gave all Americans the right to freeze their credit reports so that no one may look at or use their credit history without their express consent. If you freeze your credit report, your current creditors will continue to report your payment and usage activity, building your rating as usual. You can thaw and refreeze it at any time in case you choose to apply for another loan or account. However, no one else will have access without your permission, which you give by thawing your credit using your password. Not only can and should you freeze your own credit, but you should consider freezing the credit of any minor children (under 16 years of age) or protected adults under your care.

Above all, stay in touch with your creditors, even if you are struggling with on-time payments. Make sure you know what you can realistically afford to pay beforehand, but you can ask your creditors what hardship programs they have available to you. Note that when creditors offer you the opportunity to skip a payment or two because of hardship, they will not report you as late, but interest will generally continue to grow on your balance.

Long-term Steps to Building or Rebuilding Your Credit Score

In order to accelerate your credit building, consider the following steps:

  1. If you receive a stimulus check, use at least a portion of it to focus your debt reduction efforts on your newest credit cards, store accounts, and loans first. Continue to make the minimum payments on all your other accounts, but the faster you can pay down your newest account, the faster you will rebuild your credit score. This is called the Debt Landslide do-it-yourself debt relief method.

  2. Find a family member who might add you to their credit card account(s) as an authorized user. You do not need to see or even use the card to benefit from your family member’s good credit. Nor will your credit affect his or her rating at all.

  3. Contact your credit union or bank to see if they offer a no-fee secured credit card. Use it just once a month to pay for a small subscription service (e.g. Disney+, Hulu Plus, or Netflix), and then pay it off in full. After 12 months, request that the card be converted to a standard credit card so you can get your savings deposit back.

See our credit building page for additional ideas and details.

Related Questions

How do natural disasters affect your credit report? If your life is directly affected by a natural disaster, you may ask your creditor(s) to add a special comment code to your report noting you were impacted by a natural disaster. This code will prevent that account (both its positive and negative information) from factoring into the VantageScore models. This code, however, will not affect your FICO scores.

Does forbearance affect your credit score? Forbearance means your lender is not actively attempting to collect payments from you. You still own the balance, and interest continues to build on the account. The longer your account is in forbearance, the larger the balance will grow, negatively affecting your credit score.

About the Author

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Client Credit Report Authorization

You hereby authorize and instruct Debt Reduction Services, Inc. (DRS, dba Money Fit by DRS) and/or its assigned agents to:
  • Obtain and review your credit report, and
  • Request verifications of your income and rental history, and any other information deemed necessary for improving your housing situation (for example, verifying your annual property tax obligations and homeowner’s insurance fees)
Your credit report will be obtained from a credit reporting agency chosen by DRS. You understand and agree that DRS intends to use the credit report evaluate your financial readiness to purchase or rent a home and/or to engage in post-purchase counseling activities and not to grant credit. You understand you may ask any questions pertaining to your credit report. However, while DRS will review the information with you, the company is not able to furnish you with a copy of your credit profile. You hereby authorize DRS to share your information from your credit report and any information that you provided (including any computations and assessments produced) with the entities listed below to help DRS determine your viable financial options.
  • Banks
  • Counseling Agencies
  • Debt Collectors
  • Landlords
  • Lenders
  • Mortgage Servicers
  • Property Management Companies
  • Public Housing Authorities
  • Social Service Agencies
Entities such as mortgage lenders and/or counseling agencies may contact your DRS counselor to evaluate the options for which you may be eligible. In connection with such evaluation, you authorize the credit reporting and/or financial agencies to release information and cooperate with your DRS counselor. No information will be discussed about you with entities not directly involved in your efforts to improve your housing situation. You hereby authorize the release of your information to program monitoring organizations of DRS, including but not limited to, Federal, State, and nonprofit partners for program review, monitoring, auditing, research, and/or oversight purposes. In addition, you authorize DRS to have your credit report pulled two additional times to conduct program evaluations. You also agree to keep DRS informed of any changes in address, telephone number, job status, marital status, or other conditions which may affect your eligibility for a program you have applied for or a counseling service that you are seeking. Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Client Privacy, Data Security, and Client Rights Policy

NOTE: This sheet is to inform new or returning clients about our services, records, fees, and limitations that may affect you as a consumer of our services. This form also discloses how we might release your information to other agencies and/or regulators. If you do not understand a statement, please ask a Debt Reduction Services (DRS) counselor for assistance.

Debt Reduction Services, Inc. (DRS) has put into place policies and procedures to protect the security and confidentiality of your nonpublic personal information. This notice explains our online information practices and how we use and maintain your information to conduct our financial education and credit counseling sessions and to fulfill information and question requests. This privacy policy complies with federal laws and regulations.

To provide our financial education and credit counseling services, we collect nonpublic personal information about you as follows: 1) Information we receive from you, 2) Information about your transactions with us or others, and 3) Information we receive from your creditors or a consumer reporting agency. We do not share this information with outside parties.

We use non-identifying and aggregate information to better design our website and services, but we do not disclose anything that could be used to identify you as an individual.

You hereby authorize DRS, when necessary, to share your nonpublic personal, financial, credit, and any information that you provided (including any computations and assessments produced) with the following entities in order to help DRS provide you with appropriate counseling or guide you to appropriate services: third parties such as government agencies, your lender(s), your creditor(s), and nonprofit housing-related and other financial agencies as permitted by law, including the U.S. Department of Housing and Urban Development.

To prevent unauthorized access, maintain data accuracy, and ensure the correct use of information, we have put in place appropriate physical, electronic, and managerial procedures to safeguard and secure the information we collect online. We limit access to your nonpublic personal information to our employees, contractors and agents who need such access to provide products or services to you or for other legitimate business purposes.

Debt Reduction Services, Inc. complies with the privacy requirements set forth in the HUD housing counseling agency handbook 7610.1 (05/2010), including the sections 2-2 Mc, 3-1 H(2), 3-3, 5-3 F, and Attachment A.5. At all times, we will comply with all additional laws and regulations to which we are subject regarding the collection, use, and disclosure of individually identifiable information.

  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

Please refer to DebtReductionServices.org for details of our services.

  1. Limits: Our services are limited to our normal weekday business hours. We do not provide individual counseling or education services after hours or on weekends, although our education courses are available 24/7.
  2. Fees: We do not charge fees for our financial management counseling and education. However, if you use them, you may have to pay for our Debt Management Program, Student Loan Counseling, Bankruptcy Certificate Services or certain financial education courses (homebuyer education, rental topics, fair housing, predatory lending, and post-purchase-non-delinquency including home maintenance and/or financial management for homeowners).
  3. Records: We maintain records of the services you receive, including notes about your progress or other relevant information to your work with us. You have the right to access and view your records by making a request to your counselor.
  4. Confidentiality: We respect your privacy and offer our services in confidence with the understanding that we may share such information with auditors and government regulators. Certain laws or situations may also lead to disclosing confidential issues, such as those involving potential child abuse or neglect, threats to harm self or others, or court subpoenas.
  5. Refusal of Services: You have the right to refuse services without any penalty or loss.
  6. Disclosure of Policies and Practices: You will be provided our agency disclosure statement.
  7. Sharing of Information: Sometimes we will need to contact other agencies or we may need to share your information, including your records, with other agencies or with regulators. We will do this only if you sign this form that gives us permission except for limited reasons; please see # 5 above for examples of such situations.
  8. Other: You have the right to be treated with respect by our staff, and we expect the same from you in return. We encourage you to always ask questions if something is not clear. We also encouraged you to express your thoughts and advocate throughout our services.

You acknowledge that this authorization will remain in effect for the duration of time that DRS serves as your housing counselor or financial education provider. You also acknowledge that should you wish to terminate this authorization, you will notify DRS in writing.

Disclosure  Statement

NOTE: If you have an impairment, disability, language barrier, or otherwise require an alternative means of completing this form or accessing information about our counseling services, please communicate with your DRS representative about arranging alternative accommodations.

Program Disclosure Form

Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
  • A Debt Management Program (DMP) for consumers struggling to pay their credit cards, collections, medical debts, personal loans, old utility bills, and past-due cell phone accounts;
  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

Relationships with Industry Partners

Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

No Client Obligation

The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

RentalFair HousingPredatory Lending / HOEPAPost-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. creditbudgetinghomeless preventiondebt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).