How to Protect Your Credit During a Crisis

by Chris on March 30, 2020

Good credit is an important asset for both landlords and tenants. Throughout 2020, landlords may need to qualify for operating loans, pull cash out of investment properties, buy properties, or refinance to stay financially sound. Tenants need good credit to find future rental housing or to qualify for a mortgage.

So, how can you protect your credit during the current financial strain?

Experts say the trick is to take a head-on, not head-in-the-sand approach to credit management:

Late Payments
Late payment notations or late fees cause significant harm to your credit score. Rather than skip a payment due date, make a minimum payment if possible. To the extent possible, spread available cash out over all creditors to cover minimum payments and avoid late payments or late fees.

If that’s not realistic, call the creditor directly and ask for help, preferably before the due date.

Many creditors, including mortgage lenders and utility companies, already have signaled a willingness to offer lower minimum payments, deferred payments, interest-only payments, or other forms of forbearance to customers affected by the pandemic.

Credit reporting agencies are encouraging these creditors to work out temporary solutions. TransUnion credit bureau has published a list of questions for creditors to guide the conversation.

Make sure you understand what is being offered and how it will be reported to credit bureaus. Also, ask for email or other written confirmation of the agreement reached with each creditor.

Create a New, Temporary Budget
Rebalance the ledgers on a temporary basis to see what, if any, costs can be deferred or cut. Explore any avenues for temporary government assistance or other income streams and continue to add to the budget as possible.

Avoid Running Up Credit Cards and Lines of Credit
To the extent possible, operate off cash reserves or assistance being provided on a temporary basis and avoid running up credit card balances or lines of credit. Avoid applying for new credit card accounts unless or until income is more predictable, as that can negatively impact your credit score and may lead to defaults.

Add a Statement to Your Credit Report
If you are being adversely impacted, you may be able to place a notation on your credit history that can be considered as a mitigating circumstance when scoring your credit. Equifax provides this example:

“Be advised that the negative accounts on my credit report are related to the Coronavirus. I intend to make these up as soon as I can.”

The notation should be placed with both Canadian credit reporting agencies – TransUnion Canada, Equifax Canada.

Watch for Fraud
Experts warn that fraudulent entries may increase at a time of economic hardship. It is a good idea to watch your credit more closely throughout 2020. You may be entitled to a free copy of your credit report through the credit reporting agencies. Individual credit bureaus may offer additional information on credit fraud prevention.

If you fear you are victim of fraud, consider placing a credit freeze on your accounts. This would prohibit anyone from extending credit in your name. Contact the individual credit bureaus, (Equifax Canada, TransUnion Canada), for instructions on placing a freeze.

You’re Not Alone
The credit bureaus are working with creditors and lenders to minimize the financial impact on those who are affected by the pandemic and help people maintain their credit standing.

The credit reporting industry wants you to know that they are there to help. As Carrie Russell, President of Equifax Canada says, “We want you to know that we are with you: working to find creative ways to assist all Canadians – individuals and businesses alike – through this global crisis.”

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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