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How debt payment deferment impacts your credit scores


An estimated 43 million Americans filed for unemployment during the pandemic. Plus, the extra $600 Americans get in weekly unemployment benefits will end July 15.

If you’re currently or anticipate having trouble making credit card, personal or auto loan payments, deferment may be a good option.

Deferment puts off loan payments by one, two, or maybe even three months. However, your loans may continue to accrue interest, and you might end up paying more in the long run or have a larger monthly payment once you resume making payments.

But what happens to your credit score when you defer payments?

Your creditor should not report late payments to the credit bureaus once you have entered into a deferment agreement and your credit scores will not be adversely impacted.

How Does Payment Deferral Work?

When you request a loan deferment and your lender agrees to the arrangement, you’re allowed to temporarily stop making payments on the loan. That temporary payment typically lasts from 1 to 3 months.

4 Points in Payment Deferment

  • Each lender will have different criteria you must meet before they grant deferment, but generally, you’ll need to apply. In many cases, it can be as simple as an over-the-phone agreement.
  • You will need to show that you’re requesting the extension due to a temporary setback, such as a loss of income, reduced income, COVID-19 or some other medical emergency.
  • Your credit report should not reflect any delinquency and the deferment will not adversely affect your credit scores.
  • Make sure to request any late payment fees be waived during the deferment arrangement.

Deferring credit card payments and other loans

Credit card payment deferment will probably come in the form of a hardship program for customers who are having trouble making payments. Depending on the terms of the card issuer’s program, cardholders may be able to:

  • Reduce the card’s annual percentage rate (APR) temporarily
  • Reduce the minimum monthly payment due
  • Waive late fees and other penalties
  • Pause payments temporarily

Car loan or personal loan payment deferment might take the form of skip-a-payment program. Instead of making a regular payment, the creditor might let a borrower skip it and have it added on to the end of their loan term. Lenders may allow borrowers to reduce their personal monthly loan payments temporarily.

Reminder: Payment history accounts for 35% of a FICO® Score. Anyone with credit cards, car loans, or personal loans, staying on top of those payments is critical to a credit score so don’t hesitate to request a deferment arrangement with your creditors.

Can Deferred Payments Affect My Credit?

Getting a break from loan payments temporarily can offer some financial breathing room, but it’s important to understand how deferred payments may affect your credit score.

When a lender approves your deferment request, it should report that your payments are currently deferred to the credit bureaus. While this may appear on your credit reports, the deferment notation won’t directly hurt your credit scores.

However, if you missed payments before putting your loan into deferment, those late payments won’t be removed from your credit history unless your creditor grants you goodwill.

Stay on top of your credit by taking advantage of weekly free credit reports from Experian, Transunion, and Equifax. Visit annualcreditreport.com.

Act Quickly If Having Trouble

If you’re currently faced with late payments or foresee being unable to afford bill payments due to COVID-19 or any other illness or loss of income, reach out to your creditor or lender quickly. They can explain options whether it be deferment or some other type of payment arrangement that can keep your account in good standing and help you avoid hurting your credit scores.

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