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Credit report errors are surging due to COVID — was your credit score hit?

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DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.

Sigrid Forberg –

COVID-19 may have infected your credit score.

Record numbers of complaints about credit report errors are pouring in against the credit monitoring bureaus, according to a consumer group, and the pandemic is to blame.

But consumers like you are the ones paying the price for these mistakes, as credit scores are being pulled down. But it’s not too late to protect yourself — and if your score has taken a hit, you can fix it.

Why it’s happening

The law last March that provided the very first stimulus checks also instructed servicers of federally backed mortgages and student loans to let borrowers put their payments on hold.

Meanwhile, credit card issuers and auto loan providers voluntarily offered payment deferrals to their customers. Americans straining to keep up with their bills during the COVID economic crisis eagerly opted to take breaks from their loans and credit cards.

Days after the relief law was signed, the Consumer Financial Protection Bureau (CFPB) released a policy statement directing companies to report that consumers were “current” on their loans even when they were taking advantage of relaxed payment schedules.

The trouble started when some lenders and loan services erroneously reported the skipped payments as “late” to credit bureaus Equifax, Experian and TransUnion, whose credit reports on consumers are used to calculate credit scores. And people who’d paused their payments soon saw their scores drop as a result.

The issue has become so widespread that class-action lawsuits against credit card issuers and other financial companies have popped up in New Jersey and Washington courts.

An explosion of errors

In 2012, the Federal Trade Commission did a study on how common credit reporting errors are. The agency found 1 in 4 people had at least one mistake in their credit reports.

Now, the pandemic has caused that problem to mushroom. Since last April 1, the CFPB has received nearly 280,000 consumer complaints about credit reporting — an all-time high, and an 86% increase from the days before the pandemic, according to the consumer advocacy organization the U.S. Public Interest Research Group.

“Consumers have every right to be angry with credit bureaus,” says Ed Mierzwinski, a senior director with U.S. PIRG. Errors in your credit reports can have long-term consequences, for your credit score and your overall finances.

Negative information will stay on a credit report for seven years, according to Equifax. That means through no fault of your own, you may have trouble taking out a mortgage or getting a car loan, student loan, cellphone or even a new job — for the better part of the next decade.

How to tell if it’s happened to you

Many people who now have credit report errors — and damaged credit scores — may not even know. When was the last time you checked your credit score?

The CFPB recommends taking a look at least once a year, but if you’ve got a big purchase coming up, you’ll want to review your score immediately. Nowadays, it’s very easy to get a peek at your credit score for free.

Keep in mind if reporting errors were already happening to 25% of the population before the pandemic, there’s a good chance there’s a mistake on one of your credit reports now — especially if it’s been a while since you checked your credit score or reports.

To help you keep track, it’s smart to sign up for free credit monitoring.

If your score has taken a hit and you find any discrepancies on a credit report — like a deferred payment that’s labeled “late” — you’ll want to dispute those with the credit bureau. If you can’t get satisfaction, you can lodge a complaint with the CFPB.

What else you can do for now

With mortgage forbearance now extended for up to 18 months and student loan payments suspended until September, you have plenty of time to get back on your financial feet, to keep your credit score healthy. (Barring any new credit report mistakes, that is.)

If you’re worried about how you’ll deal with those bills once the loans are unpaused, refinancing to lower interest rates could save you hundreds of dollars a month and make your payments much more manageable.

  • Refinancing your mortgage: When was the last time you refinanced your home loan? If it’s been more than a year, you’re overdue. Rates remain historically low, so refinance your existing mortgage and reap big savings. An estimated 16.7 million U.S. homeowners could reduce their monthly house payments by an average $303 through a refi, according to mortgage tech and data provider Black Knight.
  • Refinancing your student loan: The Federal Reserve’s most recent data shows 31% of U.S. adults take on some education debt. And in 2019, the average borrower still owed between $20,000 and $25,000. Refinancing your student loan can help you pay off your debt years sooner and make your payments more affordable.
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Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

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