Credit Protections Under the CARES Act

If you missed one or more loan, credit card, or mortgage payments because of the COVID-19 pandemic, the creditor was allowed to report you as delinquent to the three main credit reporting bureaus (Equifax, Experian, and TransUnion), and your credit scores would have taken a hit. But if you made an agreement for payment relief before you fell behind, the Coronavirus Aid, Relief, and Economic Security (CARES) Act required the creditor to report your account as current on your credit reports.

While the credit reporting requirements and limitations discussed in the article below have expired, if a creditor violated this law during the effective period and damaged your credit, you can file a dispute with the credit reporting bureau, and you might have cause for a lawsuit against the creditor.

When Federal Law Prohibited Negative Credit Reporting

The CARES Act, which was signed into law on March 27, 2020, Act amended the Fair Credit Reporting Act (FCRA) to stop adverse credit reporting during the COVID-19 crisis—but only under specific circumstances. (15 U.S.C. § 1681s-2(a)(1)(F).)

Under the amended FCRA, if a "furnisher" made an accommodation because you were affected by COVID-19 during the covered period (see below), that furnisher had to report your account as current to the credit reporting agencies, so long as you weren't already delinquent on payments. (A "furnisher" is an entity, like a lender or creditor, that provides information relating to consumers to one or more credit reporting agencies for inclusion in a credit report.)

Specifically, the creditor had to continue to report your debt as current if you were up to date on the debt when the creditor agreed to:

• let you defer one or more payments
• let you make a partial payment
• forbear any delinquent amounts
• modify a loan or contract, or
• give you any other assistance or relief.

You had to come to an agreement first to avoid harmful reporting. You couldn't unilaterally stop making your payments, delay your payments, or pay less than you were supposed to without talking to your lender or creditor beforehand. And you had to stick to the terms of the deal.

If you were already delinquent at the time of the agreement, however, the creditor could keep reporting the delinquent status unless you brought the account current. Also, in the case of a charge off, the creditor was allowed to continue to report it as a charge off.

But if your account was already delinquent and you made an agreement, the creditor couldn't report you to the credit reporting bureaus as more delinquent. So, the bureaus couldn't, for example, report you as 60 days delinquent if you were 30 days delinquent when you made the agreement. Also, if your account was already delinquent and you made an agreement, and you brought your account current during the covered period, the creditor had to report that you were current on your account.

What Was the Covered Period?

The law defined "covered period" as the period starting January 31, 2020, until the later of 120 days after the enactment of the CARES Act or 120 days after the end of the national state of emergency declaration. The COVID-19 national emergency declaration ended May 11, 2023.

So, these credit limitations and protections under the CARES Act expired on September 8, 2023.

What Happened If I Missed Payments Because of COVID Anyway?

If you weren't able to work out an agreement with a creditor and you fell behind in payments on a debt, that creditor was allowed to report the delinquency to the credit reporting bureaus. As a concession, some creditors used a special code, one for natural disasters that adds a comment to the report, for delinquent debts during the pandemic.

This code might make a difference if a potential creditor actually reads the full report when making a lending decision. But any debt reported as delinquent still shows up as negative on reports and can hurt your FICO credit score. FICO doesn't factor this kind of code in when calculating credit scores, although VantageScore will disregard late payments for accounts with a disaster code.

Consider Adding an Explanatory Statement to Your Reports

If you review your credit reports and find that a creditor added derogatory information after you missed payments due to COVID-19, you may add an explanatory statement to your reports.

Technically, the credit reporting bureaus are required to place a statement in your file only if you're disputing the completeness or accuracy of a particular item. However, while the bureaus don't have to include a statement if you're only explaining extenuating circumstances or other reasons why you haven't been able to pay your debts, they usually will.

Once you file a statement with a credit reporting bureau, the bureau must include the explanation—or a summary of it—in any report that has that information. If the reporting bureau assists you in writing the description of what happened, it may limit your statement to 100 words. Otherwise, there's no specific word limit.

But you should try to keep your comment to 100 words or less. That way, the bureau is more likely to use your unedited statement. If your explanation is lengthy, the bureau will probably condense your information to just a few sentences or codes. To avoid this problem, keep your statement clear and concise. For example, you might say something like, "The delinquent accounts showing on my credit report were because I lost my job due to COVID-19. I now have a new job."

Be aware, however, that you need to be careful about when and whether to use this kind of explanation. It could be an indication to potential future creditors that you didn't have the financial reserves to withstand a short-term cash flow problem, which could make you a credit risk in their eyes.

Getting Help

Again, the legal requirements and limitations on credit reporting discussed in the article below have expired. But if a creditor violated this law during the effective period and damaged your credit, you can file a dispute with the credit reporting bureau, and you might have cause for a lawsuit against the creditor.

If you need advice about how to manage your debts so that you can protect your credit, consider speaking with a nonprofit credit counseling agency, like those affiliated with the National Foundation for Credit Counseling. A credit counselor can discuss strategies with you, as well as let you know about different ways to reduce your debt and other financial obligations. You should, however, avoid for-profit debt relief services.

If you need legal advice about how to respond to your creditors or need assistance dealing with them, talk to a knowledgeable debt settlement attorney in your area.