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Job losses and extended isolation have Americans across the country worried about the future. Economic distress, Covid-19 (Coronavirus) pandemic is raising questions for many consumers.
Many of our clients have asked of how to handle their finances and how manage their credit with the information reporting from their creditors to the 3 National Credit Reporting Agencies.
Follow these best practices to help minimize the impact of Coronavirus on your credit standing:
Q: What is the best practice for a consumer facing an economic downturn when it coms to credit standing?
Q: What steps can I take to avoid falling into debt during the Covid-19 pandemic?
Falling into debt because you could be out of work or a reduction of hours has happened across the country. The inability to pay bills, student loans, medical loans or other expenses and not limited to credit cards. We recommend financial planning out a minimum of 3 months forecasting your expenses and future payouts.
Budgeting is helpful to keep credit card debt down, where possible. Take a look at how much you’re making and what you’re spending. Identify places where you may be able to cut usual costs.
Talk to lenders and creditors. Depending on your unique financial situation it may make sense to call their lenders and creditors to discuss your options. There may be options to defer payments or negotiate different interest rates.
Q: What about consumers who fall into debt or who are anticipating a financial hardship to layoffs or temporary closures due to Covid-19?
Consumers experiencing financial hardships are likely wondering how potentially late or reduced payments might impact their credit standing. Many lenders and creditors are aware of the financial challenges caused by Covid-19 and are taking steps to help consumers face them:
We will update this page if we learn of new relief programs that become available.
A: It’s important to remember that even one late or missed payment may impact credit scores and remain on credit reports for seven years. But generally, late payments don’t end up on credit reports for at least 30 days after you miss the payment.
If you’re out of work or struggling due to the pandemic, contact your lenders and creditors to explain your situation and see if any accommodations can be made. In some situations like Covid-19, it’s possible that lenders and creditors may have special assistance available to reduce the risk of impacting your credit standing. Some creditors or lenders may waive late fees or offer short-term loans, and some may provide the opportunity to make reduced payments, interest-only payments, or no payments for some period of time — a practice known as forbearance.
Some debt collectors are known to practice unfair debt collection methods that can be deemed as harassment or a violation of the Fair Debt Collection Practices Act (FDCPA).
If there are any violations of the Fair Debt Collection Practices Act (FDCPA) or the Fair Credit Reporting Act (FCRA) on your credit report or by collection agencies, we refer to an attorney that specializes specifically against the unfair and/or abusive practices by debt collectors.
For example, here are some actions a collection agency is not allowed to do:
These accounts mainly include any open collection accounts and charge-off accounts that still have a balance.
If any violations are found, you may be entitled up to $1,000. This step can also contribute to 30% of your credit score versus whatever is positive or negative on your file but not limited to your inquiries and or balances.
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