Many homeowners have chosen to defer mortgage payments through the Covid-19 pandemic. We had written an article about the pros and cons of deferring your payments a few months ago, however, we did not touch on how this may affect your credit.
In a perfect world, deferring your mortgage payments should not affect your credit score at all, however, there are a few people who have notices their credit scores dropping and it's due to deferred payment errors.
Mortage deferrals need to be reported in a certain way and it needs to be done within 30 days, if not done correctly, it can negatively affect your credit score. A false late or missing payment can affect your credit score by up to 150 points! Correcting this can take months and it may never be fully repaired correctly until your deferrals have ceased and you're able to build your credit score back up again.
If you have chosen to defer your mortgage payments, I suggest you speak with your bank as soon as possible and ask them how they are reporting your deferred payments and how often. I also suggest obtaining a copy of your most recent credit report to review your score and recent history to ensure this has not affected your score negatively.
As we all know, our credit scores are extremely important and can impact many things in our lives, not just our mortgages. Credit scores are used to obtain a cell phone plan, buy a new vehicle, rent an apartment, and so much more.
If you find that your credit score has been impacted negatively due to deferrals, we suggest speaking with your bank immediately and asking them to provide the credit bureau with the correct information. But keep in mind, this update will not happen overnight and may take months to fix so getting on top of this now is imperative!