The Ultimate Guide to Credit Cards
Sunday, May 26, 2024

How the CARES Act Impacts How Credit Cards Are Reported

Cares Act Impacts How Credit Cards Are Reported
John Ulzheimer

Written by: John Ulzheimer

John Ulzheimer
John Ulzheimer

John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. The author of four books on the subject, Ulzheimer has been featured thousands of times in media outlets including the Wall Street Journal, NBC Nightly News, New York Times, CNBC, and countless others. With over 30 years of credit-related professional experience, including with both Equifax and FICO, Ulzheimer is the only recognized credit expert who actually comes from the credit industry. He has been an expert witness in over 600 credit-related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit. In his hometown of Atlanta, Ulzheimer is a frequent guest lecturer at the University of Georgia and Emory University's School of Law.

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Edited by: Lillian Guevara-Castro

Lillian Guevara-Castro
Lillian Guevara-Castro

Lillian Guevara-Castro brings more than 30 years of editing and journalism experience to the CardRates team. She has written and edited for major news organizations, including The Atlanta Journal-Constitution and the New York Times, and she previously served as an adjunct journalism instructor at the University of Florida. Today, Lillian edits all CardRates content for clarity, accuracy, and reader engagement.

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Advertiser Disclosure

The Coronavirus pandemic and subsequent nationwide containment efforts have affected the livelihoods of millions of Americans. In fact, it would be hard to say that anyone has been spared some form of disruption to their lives as a result of the global pandemic. At the beginning of June 2020, the number of unemployed workers in the country exceeded 20 million, according to the Bureau of Labor Statistics.

In response to the pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, which President Trump signed into law on March 27, 2020. The CARES Act, which is some 880 pages long, provides numerous relief options to those affected by the pandemic, including a requirement for creditors to adjust how they report certain accounts to the credit bureaus.

As a credit card holder, you may wonder how the CARES Act will affect your credit card account or accounts. More specifically, you probably want to know more about how your card issuer will report your credit cards to the credit bureaus. The answer, as with most credit-related questions, depends on several factors.

How the CARES Act Can Protect Credit Reports and Scores for Cardholders

The CARES Act amended the Fair Credit Reporting Act (FCRA) and provided American consumers with some new and temporary protections. If you’re not familiar with the FCRA, it is the Federal law that defines how the credit reporting agencies and creditors must operate as it pertains to the use and accuracy of credit reports. The FCRA also confers numerous rights to consumers regarding the protection of their data and includes free access to their credit reports.

Many credit card issuers and lenders are offering special payment arrangements to borrowers who cannot afford to keep up with their regular payments during the pandemic. The CARES Act requires these arrangements for federally guaranteed student loans and mortgage loans insured by the government. But there are no mandated protections for credit card issuers, although card issuers are providing them voluntarily.

The CARES Act calls these payment arrangements accommodations. An accommodation is defined as an agreement to defer or forbear payments, reduce payments, grant loan modifications, or offer any other assistance to any consumer who is affected by COVID-19.

Photo of a credit card statement

Cardholders can request a payment accommodation from their issuer if they’re having trouble making payments. If an accommodation is made, the issuer must report the account as current under the CARES Act.

If your lender makes a special payment arrangement with you and if you continue to live up to your end of the accommodation agreement, the CARES Act requires the company to report your account as being current to the credit bureaus in most cases. Your minimum payments may be reduced or paused all together, but the lender cannot report your account as being late or past due, except for under a limited number of scenarios, which we’ll address later.

If you make a payment accommodation with your card issuer, you should understand that the protected credit reporting period won’t last forever. The CARES Act offers credit reporting protection for payment accommodations only between January 31, 2020, and until the end of the national emergency declaration, plus 120 days.

In the CARES Act, this range of time is called the “covered period.” No one knows how long the covered period will last. What we do know is that it will eventually expire, as will your new credit reporting rights under the CARES Act.

When the CARES Act Won’t Protect Your Credit Reports and Scores

In general, credit card issuers and lenders must continue to report your accounts as being current during the pandemic when you set up a hardship accommodation. This is a big win for many consumers. There are, however, some situations where the CARES Act’s special credit reporting protections don’t apply.

Your credit card issuer does not have to report your account as being current if:

  • You don’t call your lender to modify, suspend, or delay your payments and your payment is at least 30 days late. Don’t assume it’s automatic, because it isn’t.
  • The account in question was already delinquent before you made a special payment agreement with your creditor and you never got caught up and made the account current.
  • Your account was already charged off prior to the covered period.

Under any of the circumstances above, a credit card issuer may report your account as late or charged off to the credit reporting agencies. And, past-due balances may also appear on your credit reports.

Late payments or past-due balances on your credit reports have the potential to damage your credit scores. This is especially true when those payment delinquencies or past-due balances are recent. Credit scoring models pay close attention to how recently any negative information on your credit reports occurred.

Requesting a Payment Accommodation from Your Credit Card Issuer

The CARES Act sets special rules that credit card issuers must follow when it comes to credit reporting. But in most cases, payment accommodations aren’t automatic. If your income is affected by the Coronavirus pandemic and you can’t afford to keep up with your regularly scheduled payments, you need to be proactive about contacting your card issuer.

And if you are worried that you won’t be able to pay even your minimum credit card payment, you should reach out to your card issuer right away. Payment accommodations do not have to be retroactive. As such, you don’t want to wait until you are already behind on your bill to ask for help.

You can find your card issuer’s customer service number on the back of your credit card. When you call, explain that your financial situation has been impacted by the pandemic. Then ask the card issuer if it’s offering any payment relief options to customers in your position.

Credit Card Issuer Customer Service Contact NumbersThere have been reports of long hold times when cardholders call their banks. This is to be expected given the flood of calls they’re receiving from people asking about accommodations.

Be persistent and call again, and again, until you reach someone.

Take notes and ask questions about any payment reduction, deferment, or forbearance options available. Find out if there are any fees associated with the credit card relief packages and if interest will continue to accrue.

Most importantly, find out what happens if the special payment period ends and you’re still having financial challenges.

If you agree to a new payment arrangement, get the terms in writing and make sure you understand them. Most of us are not familiar with banking jargon like “forbearance” or “deferral”, so ask the bank representative for a clear explanation. You don’t want to find yourself in a “he said, she said” situation if the accommodation doesn’t work out as planned.

Other Ways to Avoid Negative Credit Card Reporting

A payment accommodation is one way to deal with a loss of income during the Coronavirus pandemic. But it’s not the only way to avoid credit reporting problems where credit cards are concerned.

If your credit is in good shape, you may want to consider a consolidation loan or a balance transfer to try to reduce the size of your monthly payment obligation on credit cards. Consolidating your credit card debt, especially if you can qualify for a lower interest rate, could save you money. Plus, if you manage your new account well, it may help you reduce your credit utilization ratio and possibly improve your credit scores as a bonus.

Ignoring financial problems is the worst choice you can make. Be proactive about your options when it comes to credit card accounts and be sure to monitor your credit reports for any changes.

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