FAQ's About Credit Scores (Mortgage Edition)

Over the past month, we’ve received a lot of questions from mortgage professionals about credit scores and protecting their clients. Here are a few of the most common questions and our advice for our mortgage partners.

What impact will a mortgage forbearance have on my client’s credit score?

This question is a tricky one. There are a few different variables that come into play when trying to understand the impact to your client’s credit score if they put their mortgage into forbearance. First, FHFA has instructed lenders to work with clients to find a reasonable repayment plan post-forbearance which should eliminate further delinquencies due to balloon repayments. Second, the CARES Act requires that while the account is in forbearance, the lender cannot report the consumer delinquent. This will be done one of two ways: either the mortgage company will use an NDC (Natural Disaster Code) while the account is in forbearance or the mortgage company will simply report the account as active without reporting any payment history. Ultimately, if a consumer decides to put their loan into forbearance, they shouldn’t see a major hit to their credit score (assuming they start making payments on time once the forbearance period ends).

What should my client do if they have a late payment from an account that was in deferment or forbearance?

In this situation, your client needs to be vigilant in working with their creditor to remove the late payment from credit. They can do this by first, sending a dispute to the credit bureaus stating that the company violated the CARES Act, and two, sending a letter directly to the creditor themselves asking them to fix the mistake on their credit report. We believe this will be a common occurrence over the next year or so. Here is a link to our blog post on how you can send a dispute letter to the credit bureaus.

What’s the best way for my client to check their credit if they are concerned?

We recommend using SmartCredit to monitor your credit during this pandemic. However, there are a handful of different options available to your clients. They can pull a credit report weekly at www.annualcreditreport.com or subscribe to a credit monitoring program directly through a credit bureau (we recommend Experian) for a more detailed service. Free services such as Credit Karma are useful, but not nearly as effective or accurate as the other options listed earlier.

We hope this information is helpful as we all navigate this pandemic together. If we can be of assistance in helping your clients prepare to credit qualify, please let us know. We offer a Free Evaluation for all clients.

Stay safe and healthy out there!