Lost Your Job Due to Coronavirus? Make This Update to Your Credit Report
by Maurie Backman | Updated July 25, 2021 - First published on Oct. 10, 2020
It pays to let it be known that you're going through a rough patch financially.
Millions of Americans have lost their jobs since the coronavirus pandemic first took hold. If you're one of them, it may be difficult to keep up with your bills, which could damage your credit score.
The most important factor that goes into calculating your credit score is your payment history, which speaks to the way you pay your bills on time (or not). But right now, you may not be able to pay on time. As such, it could make sense to give potential lenders a heads-up about your circumstances in the form of a consumer statement on your credit report.
Should you add a statement to your credit report?
If you're going through unusually tough times, it could pay to add a statement to your credit report to that effect. Even outside of the coronavirus crisis, you're allowed to add a brief statement explaining the circumstances at hand.
Say you've fallen behind on some bills because your income took a major hit recently. In that case, it could be a good idea to offer up a brief explanation.
You might compose a statement that reads as follows: "I lost my job in April 2020 and was late paying some bills in August 2020 once my savings ran out."
There are three main credit bureaus, Equifax, Experian, and TransUnion, and you'll need to notify each one individually. During the pandemic, you can get free weekly copies of your credit reports from AnnualCreditReport.com. It is also worth checking your reports for any mistakes before you add your personal statement.
How consumer statements work
Your consumer statement doesn't have to be lengthy -- in fact, it can only contain up to 100 words (200 in Maine). But what that statement does is explain why you may have fallen delinquent on certain expenses.
Now to be clear, a consumer statement won't change your credit score, nor will it create a scenario where negative information is suddenly omitted from your credit report. But what it will do is offer insight into your finances that could make a difference to lenders.
Say you apply for a loan and your credit score isn't that great because you've fallen behind with your bills. A lender may be more inclined to give you some leeway if they read your statement and see that your delinquency is the result of temporary job loss, and not just general irresponsibility on your part.
On the other hand, a personal statement could work against you. Depending on the credit agency, it could remain on your report for two years. Say you're out of work now but get hired again in two months. You then manage to boost your income, get current on your bills, and stay timely on your payments. After a year, your credit score could improve substantially.
If a lender then checks your credit report and sees a reference to a delinquency in your consumer statement, it could raise a red flag. Or, to put it another way, that statement might reveal issues a lender wouldn't otherwise have discovered. You should notify the credit bureaus as soon as your situation changes and ask them to remove the note.
Of course, there's another type of statement you can add to your credit report: a statement of dispute. That comes into play when there's negative activity on your record that you don't agree with, but that isn't the kind of statement we're discussing here.
Be open with your lenders
Falling behind on bills may seem inevitable if you're out of work, but these days, there's a lot of help available. You may be eligible for a coronavirus hardship loan, which could provide you with a sum of cash that allows you to stay current on your bills.
You can also reach out to your loan servicers and credit card issuers and ask for more flexible payment terms. Some lenders may agree to let you defer payments temporarily or make partial payments until your finances improve. If you're open with your creditors and ask for help, you might avoid falling behind at all -- in which case the need for a consumer statement would go away. But if you're already past that point, it could pay to add a statement to your credit report so lenders understand the circumstances you're grappling with.
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