Credit Repair: How does the government shut down affect my credit score?



Columnist Elyse Wood.  Photo: Elyse Wood.
The government shut down is now in its 23rd day and many Federal workers did not get paid. Among other worries, furloughed workers may be wondering how missed or late payments might impact their credit if this shutdown continues and they’re unable to pay their credit cards or other bills on time. You may have some time though! For all credit card statements, regardless of when, the due date will be at least 21 days AFTER the date of the statement date. 
As per the CARD ACT requirement. For other loans you may have the due date is normally set by the lender according to their policies and state and/or federal regulations. Even if your credit obligations are not paid by the DUE date, the lender CANNOT immediately report you as being delinquent to the credit reporting agencies, unless you are already at least 30 days late or delinquent. The credit reporting agencies have a rule that only permits a lender to report the delinquency AFTER the payment is a full 30 days past the due date. There is NO way for a lender to accurately report someone as being “1-29 days late.” It doesn’t exist in credit reporting.
*For example* If your due date is August 3rd, and you do not make your payment, the earliest your lender can report you as being “late” to the credit bureaus is September 3rd.
Are government workers protected from negative credit reporting and credit score damage resulting from not receiving a paycheck?
There are four parties involved in credit reporting and credit scoring: your lenders (data furnishers), the three credit reporting agencies (Experian, TransUnion, Equifax), credit score developers (FICO, VantageScore), and borrowers or debtors (me and you). 
Here’s how each of them might play a role.
Data Furnishers: These are companies that “furnish” or report information to the credit reporting agencies. These are almost always financial services companies, loan servicers, or debt collectors.
Data furnishers are the most important party as it pertains to the impact of late payments on furloughed or unpaid government workers. They can choose to report late payments to the credit reporting agencies, or choose to not report late payments to the credit reporting agencies.
There is an exception: Student Loan lenders that service federally guaranteed student loans are bound by their agreements with the federal government to report late payments to the credit reporting agencies.
Credit Reporting Agencies (CRAs): There is no systemic method for the CRAs to prevent late payment reporting simply because workers have been furloughed or are otherwise unpaid because of the shutdown. The CRAs don’t know who is furloughed and who is not. They also don’t know which late payments are caused by the shutdown versus those that have been caused by something else. 
Credit Scores: Credit scores are influenced by what appears on a consumer’s credit reports, as reported by the furnishers. There’s no exception programmed into credit scoring systems that can tell the difference between late payments caused by a government shutdown and those caused by some other reason.
Debtors: Borrowers (you &I) can continue to make at least their minimum payments while they are furloughed, this will protect their credit reports and credit scores from any negative credit impact caused by the furlough. If borrowers cannot or choose not to make their payments, they may very well end up with late payments on their credit reports which will remain there for the subsequent seven years, as allowed under federal law.
Borrowers can dispute to the CRAs that the reason they couldn’t make their payments was because of the government shutdown. The CRAs would contact their lenders to find out how the account should be reported.The lender can either choose to have the CRAs remove the late payments (“goodwill deletion”), or they can choose to have the CRAs maintain the late payment(s), which would be completely legal.
Last But Not Least: It is also possible President Trump could issue an executive order that protects furloughed government employees from late payment credit reporting. This executive order could direct lenders and servicers to NOT report any late payments to the credit reporting agencies for their borrowers who are government employees.
In the event that you do miss a payment or have, and your a federal worker furloughed, there are some good will letters and or hardship letters you can send out to your creditors explaining the situation in regards to your account so that you may prevent the creditor from reporting your account late to the credit bureaus. (We can assist with this)
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