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You Can Shield Your Credit Report From Late Payments During the Virus Crisis. Here's How

The $2 trillion stimulus bill, known as the CARES Act, provides extra protections for consumers who suffer income loss. Some critics say it doesn't go far enough.

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Falling behind on bill payments -- credit cards, auto loans, rent, mortgages, utilities, and so on -- often results in a black mark on your credit report. That can lower your credit score and haunt you for years, making it more difficult to borrow in the future.

Fortunately, there is temporary help for millions of Americans, buried in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. That's the $2 trillion federal stimulus bill passed by Congress and signed into law by President Trump.

Section 4021 (page 209 of this link) aims to help protect your credit. If you fall behind on payments due to virus-related financial distress and reach an agreement with your lender, the bank must show your account is still current -- no black mark.

The process is not automatic, however. You must take action. And we encourage you to do that as soon as possible. Call the bank or lender to explain your situation and get an agreement going. Keep detailed notes of when you called, to whom you spoke, and what you discussed. Ask for a reference number related to your call. That way, if there's an issue later on, you have a record.

Just notifying your lender is not enough to protect your credit report. You must reach an agreement with your bank or credit union on when you'll resume making payments, and how you will make up missed payments. A formal agreement is the only way to get the protection the CARES Act spells out.

Requiring families to take action does not sit well with some consumer advocates. The League of United Latin American Citizens (LULAC) is calling for a nationwide stop to negative credit reporting during the pandemic -- without requiring borrowers to ask for it.

"A lot of times, we don’t even know our own rights," said Sindy Benavides, the group's CEO. "We don’t know, sometimes, that we can even have these conversations with our own lenders."

Benavides says LULAC sent a letter to Congress this week, asking for greater consumer protections during the health crisis.

"By Congress passing a moratorium on credit reporting during COVID-19, it really [would] give our American community that breathing room that they need so desperately to make sure that they survive this," she said.

Barring a new directive from Washington, protecting your credit report during the pandemic remains your responsibility. If you're going to miss a payment, contact the banks that hold your mortgage, car loan, and credit card debt. Let them know you're falling behind. Ask for help. And, come to an agreement.

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