No Coronavirus Break for Consumer Credit Scores

Credit industry persuaded Congress it would protect people who miss payments due to virus; consumer groups push back

Missed or late payments on car loans and other borrowing will be recorded during the coronavirus outbreak, but the credit-reporting industry will give them a special code.

WASHINGTON—The financial industry persuaded Congress to reject a moratorium on recording missed and late payments on credit reports during the coronavirus outbreak, raising concerns that people who lose their jobs will take a lasting hit to their credit scores.

Legislation that would have prevented credit bureaus from reporting negative credit information for four months was shelved in the lobbying frenzy ahead of last week’s passage of the roughly $2 trillion economic stimulus bill, lawmakers said.
The credit industry argued that it already has adequate measures to protect people’s credit during disasters, and that incomplete reporting would lead to lasting problems in determining people’s creditworthiness.
Democratic Sens. Sherrod Brown of Ohio and Brian Schatz of Hawaii have pledged to keep pressing for their moratorium proposal. The National Consumer Law Center said trusting creditors to help consumers “is just not acceptable.”

“While our bill didn’t make it into the final package, this issue isn’t going away,” Mr. Brown wrote on Twitter last week. “I’ll keep fighting with @brianschatz to make sure families don’t take an unfair hit to their credit during this crisis.”

A person’s three-digit credit score is based on payment history, amount of outstanding debt, length of credit history and new accounts. Payment history includes things such as mortgages, auto loans and credit card payments.

Who Gets a Piece of the $2 Trillion Coronavirus Stimulus Package

Creditors say they will use a natural-disaster code during the pandemic wsj.comfor missed or late payments, which they will flag to future lenders that the borrower isn’t at fault and won’t harm credit scores.

“Reporting negative information with a code doesn’t work because that negative information is still in the system,” said Ed Mierzwinski, who oversees the federal consumer program for U.S. PIRG, a consumer advocacy group. “We are bracing for a flood of late and missed payments because of the crisis. The only way to truly help people is to shut off the spigot of negative information from the credit bureaus.”
Messrs. Brown and Schatz introduced their negative credit reporting moratorium proposal on March 18. Three days later, the U.S. Chamber of Commerce and associations representing banking, financial services companies and credit unions delivered a letter to Senate and House leadership assuring them that they don’t need to step in.

“As you consider options to protect consumers from harm, please be aware that blanket suppression of all adverse information in credit reports could disrupt consumer access to credit in the future,” the letter says.
When it came time to finalize the stimulus package last week the strict proposal was gone, replaced by a provision drafted by Republican Sen. Mike Crapo of Idaho, chairman of the Senate Banking Committee, that leaves it up to creditors to help consumers through pandemic-induced economic hardship. Mr. Crapo’s office didn’t respond to a request for comment.

“Where is the political willpower to protect consumers?” asked Chi Chi Wu, a staff attorney with the National Consumer Law Center. “This is one of the few things that the federal government can do to truly help people that doesn’t cost the federal government any money.”

The credit-reporting industry says its three main companies, Experian, Equifax and TransUnion, will abide by reporting restrictions Congress puts in place, but argues that limiting negative information will only make it harder for lenders to decide which borrowers to approve for loans and mortgages.

The push to suppress negative credit information comes after a series of reforms that limited the information on credit reports to protect consumer privacy, said Francis Creighton, chief executive of the Consumer Data Industry Association, which represents credit bureaus.

Credit reports no longer include certain negative information like most tax liens and judgments, meaning lenders don’t see that information when reviewing loan applicants’ likelihood of repaying their debts. Lenders can access these records in other ways.

“The lender needs to understand what a person’s ability to repay is,” Mr. Creighton said. “Taking information away from them is going to make that problem worse for consumers” through more reluctance to issue credit or through higher interest rates on loans or credit lines.

Mr. Creighton’s group is urging people affected by the economic slowdown to contact creditors directly to seek delayed payment agreements or forgiveness of some debts, under existing protocols for disasters and financial crises.
Consumer advocates said that while some creditors might work to help people, the absence of a congressional mandate to do so means that others won’t.
They listed potential problems such as larger companies not having enough customer service and training capacity to handle the deluge of concerned borrowers while smaller lenders—whose clients tend to be among the most financially vulnerable—could fail to code troubled accounts for the natural disaster.

Support for suppressing negative credit information as part of a new round of stimulus funding was growing this week in Democratic circles.
“We must suspend wage garnishment, car repossessions, credit card interest and penalties, and any negative credit reporting for the duration of the pandemic (including for at least 120 days after this is over),” Democratic Sen. Kamala Harris of California tweeted on Monday.

How to Read the Results of Your Credit Report Dispute

So, you’ve disputed an item on one of your credit reports, and now you’ve gotten your response. Now what? These tips about how to read the results of your credit report dispute can help.

Decoding the terminology

First of all, it’s important to understand the terminology you might find in the results of your credit report dispute. Each credit reporting company can use their own phrases, and here are some terms to look out for:

  • The credit reporting company deleted the disputed information. You might see the terms “information deleted,” “deleted,” or “processed” in your credit report dispute results.
  • The credit reporting company corrected the disputed information. You might see the terms “information updated,” “updated,” or “processed” in your credit report dispute results.
  • The credit reporting company said the disputed information is accurate. You might see the terms “verified as accurate” or “remains.”
  • The credit reporting company said the disputed information is accurate and updated your report. You might see the terms “verified and updated” or “verified as accurate and updated.”
  • The credit reporting agency deemed the dispute “ frivolous.” This can happen when a credit reporting company thinks the dispute is identical to a previous dispute, or if there was missing information that would have been necessary to process the dispute. If the dispute is deemed frivolous, the dispute process will not move forward from there.Figuring out next steps

Once you understand the terminology, you’ll likely want to know what you should do next. If you’re happy with the results of your credit report dispute, then there’s most likely nothing else you need to do.

However, if you still think the report has inaccuracies, you have the option of filing a “statement of dispute.” This is a statement that can be put on your credit report that describes the information you’re disputing. You can add a statement of dispute through the credit reporting company showing the error.

Finally, if your dispute was deemed frivolous, you could re-file the dispute with the proof you weren’t able to include the first time.

Remembering the purpose of a credit report dispute

When all is said and done, it’s important to remember the purpose of disputing your credit report. The purpose of disputing a credit report is to correct inaccurate or out-of-date information. The purpose is not to clean up negative items that you wish to have removed from your report, which will happen.

According to the Fair Credit Reporting Act (FCRA), consumer reporting agencies must “adopt reasonable procedures” that are “fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.”

What’s more, if the consumer finds inaccurate information on their report, the consumer reporting agency must:

“ … free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file … before the end of the 30-day period beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller.”

What all this means is that the FCRA has outlined a right for consumers to have fair and accurate credit reporting. The FCRA also empowers them with the ability to dispute inaccurate information. Although the FCRA does not outline a right to have accurate negative information removed from your credit reports, positive borrowing behavior and time can diminish the effect of negative items.

You don’t have to stop here

Credit reports are dynamic documents that are typically updated at least once a month. That’s why checking your reports regularly after a dispute can be an important tool in solving issues quickly.

Reviewing your credit reports helps you spot mistakes quickly if they happen, as well as signs of potential identity theft. In other words, this simple act is one that can help you protect your financial health in more ways than one. A little bit of time can go a long way in obtaining accurate credit reports.