The federal government partial shutdown has impacted hundreds of thousands of federal employees, halting their paychecks and, in some cases, forcing them to make difficult decisions when it comes to expenses and payments. While some employees will receive back pay, others such as some federal government contractors may not.
If you are impacted by the partial shutdown, it’s important to contact the companies with whom you have financial commitments so you can make them aware of your situation. This includes not only banks, credit unions and financial institutions, but also your landlord, utility and telecommunications providers.
Some financial institutions have suspended late payments, adjusted fees, increased credit lines, offered repayment plans, provided loan modifications, or forbearance programs. Some utility companies have also offered to help consumers who have been impacted.
Forbearance is an important tool for consumers to discuss with their lenders as it is a period of time during repayment in which a borrower is permitted to temporarily postpone making regular monthly payments. The debt is not forgiven, but regular payments are suspended until a later time. A forbearance agreement is most commonly applied to mortgages and student loans. However, forbearance is applicable to any type of loan. The consumer may be making reduced payments, interest-only payments or no payments.
Furloughed federal employees may have many questions about the furlough’s effect on their finances and credit. These questions may include:
Q: What can Equifax do for me?
A: One of the first things you can do is get a free copy of your credit report from each of the nationwide credit bureaus. You can do this once every 12 months by going to www.annualcreditreport.com. Additionally, Equifax is offering a free credit report service by visiting https://www.equifax.com/personal/products/credit/government-shutdown/. You can also get there by going to www.equifax.com and clicking on the homepage banner message about the government shutdown. Checking your credit report will help you verify that all of the information – including account information – is complete and up to date. You may also want to consider including a statement about your current situation on your credit reports. Including this kind of statement on your credit reports may help future lenders or creditors better understand changes they may see on your credit reports or credit scores.
Q: What should consumers be looking for on their credit reports right now?
A: After discussing options with their lenders, consumers should review their credit reports to ensure that any recent payment history accurately reflects any arrangements they have made with their lenders or others with whom they have a financial relationship. This information can be found in the balance and payment sections of a consumer’s credit report. Because lenders and creditors typically report information to the nationwide credit bureaus every 30 days, any new arrangements may not appear right away.
Q: My credit score was already low before the partial shutdown. How can I ever recover?
A: There isn’t a one-size-fits-all, quick fix. Continuing to build a track record of responsible credit behaviors – such as paying your bills on time, every time – is an important step. If you find yourself in a situation where that’s not possible, communicating with your lenders is extremely important. Be sure to ask questions about your payment terms (including interest rates); refinance options; and other payment plan options.
Q: If I have to make a late credit card payment, how long does it take for that to show up on my credit reports?
A: Late payments generally won’t end up on your credit reports for at least 30 days after the date you miss the payment, although you may still incur late fees. If you’re only a few days or a couple of weeks late on the payment, and you make the full late payment before that 30 days is up, lenders and creditors may not report it to the credit bureaus as a late payment. It’s important to stay in contact with lenders and creditors to keep them apprised of your situation and discuss with them whether they will plan or waive any late payment information to the credit bureaus. Keep in mind, if you aren’t able to make the full payment, and only make a partial payment, it generally will be reported as late. Late payments remain on your credit reports for seven years, and even one late payment can impact credit scores.
Q: I was going through the mortgage process when the partial shutdown started. Do I need to tell the lender that I am no longer receiving a steady paycheck?
A: During the mortgage application process, it’s in the consumer’s best interest to be completely transparent with a potential mortgage company as full disclosure is required. However, the mortgage company may be willing to work with you during this time.
Know that some lenders such as Fannie Mae and Freddie Mac announced new mortgage origination requirements. More information about those requirements and what they mean can be found here.