Hundreds of consumers across the country are up in arms. They said their credit is being ruined all because lenders are mistakenly putting black marks on their accounts.
This is an urgent warning for all consumers who deferred making credit card, car loan, or mortgage payments amid the pandemic. Lenders are not supposed to penalize you for COVID-related relief but unfortunately, in many cases, that is exactly what they are doing.
"I'm in event marketing, and my job was canceled because of the coronavirus," said Dan Murphy of Newtown Square, Pennsylvania.
Concerned about finances, Murphy said he contacted his bank for mortgage relief.
"The two most important things to me are my credit score, and my mortgage, my house. And I take care of them above everything else," he said. "I've had my mortgage for eight years and I have never missed a payment."
Murphy told the Troubleshooters he entered into a mortgage forbearance agreement for the months of April and May. The agreement should have meant he could put off payments without penalty and without being labeled delinquent.
But guess what Murphy says happened?
"I went back to paying my mortgage, but they didn't file the paperwork properly, which then put me into delinquency," he said.
And that could have a huge impact on Murphy's excellent credit score.
"It is a nightmare, and in fact, if you have a good credit history and you miss one late payment, a single late payment that can make your score plunged by as much as 100 points, and it will take you a long time for that score to go back up," said Herb Weisbaum, a credit expert for Checkbook.org.
The CARES Act prohibits lenders from putting negative information on the credit reports of consumers given mortgage relief or assistance related to the COVID-19 emergency.
But hundreds of consumers across the country say the lenders are putting black marks on their credit anyway.
"If you were applying for a loan, renting an apartment, trying to do something of that nature, even applying for a job, it could actually damage those hopes of what you're planning to do. So this can have very, very serious consequences," said Weisbaum.
So here's what you need to do:
"If you get any sort of accommodation from a lender, you need to document that in case something goes wrong, that could be taking a screenshot that could be getting some kind of email that verifies what's taking place," said Weisbaum.
That way if something goes wrong, you can show proof of your case and get the error corrected.
Second, check your credit report now and regularly moving forward.
"You need to do that at all three of the credit reporting agencies, Equifax, Experian, and TransUnion. Right now you can check your credit report for free every single week, until April of 2021. You go to annual credit report.com - that's the only place you should go, annualcreditreport.com - and you can check your report once a week and you want to make sure that that account has not been reported as delinquent when you were promised that it wouldn't be by the lender," he said.
Meantime, Murphy has another warning. He said his bank wasn't clear about how he would have to pay back the amount in forbearance.
"When I first contacted the bank about the forbearance, the way that they explained it would be that the payments would be tacked successively on to my mortgage, extending it by two months. Instead, it's in the form of a balloon payment that will be due in total at the end of my mortgage. The bank told me one thing and they did another thing. It's been a very frustrating experience for me, especially considering the poor customer service that I received during the entire experience," said Murphy.
Fortunately for Murphy, the bank's error was corrected quickly enough that his credit score did not take a nosedive but many other consumers said they have not been so lucky so again, check your credit report and score and if there are any issues, contact your bank and the credit bureaus right away.
Statement from Citadel Credit Union concerning Murphy's allegations:
Due to privacy regulations, Citadel Credit Union is unable to discuss any details of a specific member's individual account(s). At Citadel, we value and appreciate our members, and prioritize service with the goal of building their financial strength. We wholeheartedly empathize that the past several months have been difficult for many people, and we've aimed to provide assistance however possible on various types of loan payments. As loan assistance options have been available, we have proactively communicated all information to our members to ensure they get the help needed to improve and/or secure their financial well-being. We are committed to continuing to provide relief on loan payments or assistance as needed.
At Citadel, we take member service very seriously, and we record calls for quality and level of service. If we find that a member was not treated fairly on a call or otherwise, it will be addressed appropriately.
Is your credit score suffering because of deferments during COVID-19?