The COVID-19 pandemic has and is expected to continue to put significant stress on the financial health of many consumers in the United States. If you are suffering or expect to suffer financial hardships as a result of the crisis, the following Q&A will address and clarify several ways in which various payment relief options may impact your VantageScore 3.0 and 4.0 scores, which are used by a wide range of creditors.1
Some consumers have seen their VantageScore 3.0 and 4.0 scores change as a result of the widespread use of forbearance and deferment codes for consumer loans on which lenders have given payment relief.
We have made the decision to make adjustments to our proprietary VantageScore 3.0 and 4.0 model algorithms to minimize the negative impact associated uniquely with the usage of these codes.
Why did my VantageScore credit score change because I asked for a forbearance or deferred payment plan?
Credit scores can change for many different reasons and everyone’s credit profile and situation is unique. Some consumers have seen their VantageScore 3.0 and 4.0 scores change as a result of the widespread use of forbearance and deferment codes for consumer loans that have received payment relief by lenders. We have made the decision to make adjustments to our proprietary VantageScore 3.0 and 4.0 model algorithms to minimize the negative impact associated solely with the usage of these codes.
What are VantageScore 3.0 and 4.0 and who uses these?
VantageScore 3.0 and 4.0 are credit scoring models developed by VantageScore Solutions, LLC. Institutions like banks, credit card companies, financing companies, auto lenders and credit unions — can use a VantageScore credit score. These scores are used to help that lender assess the likelihood that you will become more than 90 days late on the payment of a loan. Many companies provide access to your VantageScore 3.0 credit score for free.
Do all credit scoring models treat forbearance and deferment codes similarly?
No. Lenders use many different credit scoring models, and those models do not all consider the same information in the same way. Other models may not treat accounts with forbearance and deferment codes in the same way as VantageScore 3.0 or 4.0.
I’m in the process of – or will soon to be – applying for a loan. What are my options for getting my score addressed immediately? Is there someone that I can speak to about this live?
Lenders use many different credit scores from many different credit score providers. It is beneficial to contact multiple lenders and shop around for the best interest rates and terms for your loans.
You may also want to regularly check your credit reports. This can be done for free on a weekly basis (through April 2021) at AnnualCreditReport.com. You can also monitor your VantageScore 3.0 credit score through a number of websites that make it readily available to you.
I’ve been temporarily furloughed from work and need to put some expenses on my credit card. I’m worried that my score will go down if my balances go up too much or I miss a payment. What should I do?
Increased utilization on a credit card could cause your score to go down. Before making additional charges, you may want to contact your lender first. Lenders have options to assist borrowers who have been financially impacted by situations beyond their control, such as the COVID-19 pandemic. These options may include a deferred payment plan.
What are the benefits of a forbearance payment plan?
An account forbearance plan allows you to suspend your scheduled payments on an account for a period of time. This action enables you to use these funds for other expenses during a time of crisis such as the COVID-19 pandemic.
How do I begin the process for a deferred payment plan or an adjustment of reporting to the credit bureaus in order to prevent my credit score from decreasing?
The first step is to contact your lender or the company that “services” your loan. Your servicer is often the company that sends you monthly bills or account statements. Lenders and servicers can help you pursue a variety of programs to ease the financial burden of this crisis and they have instructions regarding how to report that information to the three national credit bureaus.
Consumers can easily view their lenders and servicers by reviewing their credit report, available for free on a weekly basis through April 2021 at AnnualCreditReport.com.
If I enter into a deferred payment plan, what is the potential impact on my credit score calculated using a VantageScore credit scoring model?
Information reported about you to your credit files (the collection of data about your borrowing and repayment history that determines your credit score) can impact your VantageScore credit score in different ways depending on many different factors. Everyone’s credit profile is also different. There is no one-size-fits-all way that information impacts a person’s credit score, but missing payments often causes scores to decline. Relief from lenders allowing you to defer payments may be beneficial if you think you will have challenges making payments on loans because of the COVID-19 pandemic. It is important to understand that there are many different credit scores and many different credit score models. We cannot speak to how other models address deferred payment plans or other accommodations.
If I miss payments during the deferred payment or other accommodation period, do those delinquencies impact my VantageScore 3.0 or 4.0 scores after the deferred payment or other accommodation period ends?
You may not be required to make payments on a loan during the loan deferment period, so you will not be reported “delinquent,” but talk to your lender about what plans and terms are available. Scoring models do take into account many other factors about a loan besides your payment status, including balance, utilization, length of time of credit established, and new accounts and inquiries.
How long does a deferred payment plan last?
The length of time that a forbearance or a deferred payment plan is in place is up to your lender’s discretion.
What other options do I have other than a forbearance or deferred payment plan?
Check with your loan provider or card issuer to determine what options are available to you. Lenders and servicers can help you pursue a variety of programs to ease the financial burden of this crisis.
What are the benefits of adding a disaster code to the information my lender supplies to the credit bureaus?
Lenders and servicers can add a code to your account(s) which indicates that you have been “affected by a natural or declared disaster.” When a lender or servicer adds a disaster code on an account, it alerts VantageScore models that your file might have been impacted by a natural disaster or an equivalent situation, like the current pandemic.
1 VantageScore credit scores are generated by the nationwide consumer reporting companies (Equifax, Experian and Trans Union) by inputting credit data pertaining to specific individual consumers into a model developed by VantageScore Solutions, LLC. VantageScore does not own or maintain credit data pertaining to specific individual consumers and does not furnish any credit data pertaining to specific individual consumers.
This article is intended solely to describe the possible impact that an action may have on a credit score that is generated using the credit scoring models of VantageScore Solutions, LLC. It is not intended to provide any credit or financial advice or guidance or to recommend the taking of any specific action. The possible impacts described herein are based on hypothetical situations and the actual impact on a credit score may vary depending on various factors, including, among other things, a person’s actual circumstances and history.