Safeguarding your credit score during the coronavirus outbreak
How missed bills, payment deferrals and financial hardship agreements impact your credit score and what to do about it.
We’ll continue updating this page with resources and information as new details emerge on how Canadian leaders and businesses are responding to COVID-19.
If you’re worried about how the current COVID-19 pandemic will affect your credit score, you probably have no reason to fret. Many of the events you’re hearing about or may be experiencing will bear no weight on your score and are not reflected on your report.
Your credit report is just a summary of how you’ve managed your credit accounts to date. For example: current accounts, applications for credit, defaults, bankruptcy or debt agreements, repayment record and requests for your report. It does not include any data about your income, bank account balances, medical information or transaction history.
What's in this guide?
- What happens if I miss a bill payment?
- What happens if I default on a bill?
- How can I avoid going into default?
- What happens to my score if I defer my home loan payments?
- What if I decide to access my RRSP?
- What if I request a credit limit increase on my credit card?
- Is there anything that can help me to manage my repayments?
- How can I see where I stand now?
What happens if I miss a bill payment?
Provided the missed payment has not gone into default, only licensed credit providers can report your repayment history to a credit reporting bureau. This includes credit card accounts, personal loans and mortgages, but does not include utility providers. A payment is considered “on time” if the minimum payment amount was made on time (or within the grace period) for the month.
Missed payments from licensed providers can be reported on your account monthly and can be held on your credit report for up to 6 years. So as long as you’re making your minimum payments, your score will not drop.
What happens if I default on a bill?
A missed payment is considered to be in default and can be reported to the bureau if it has been overdue for at least 30-90 days depending on the lender and after receiving the second notice from the creditor, the amount remains unpaid.
A reported default will harm your credit score, can remain on your credit file for up to 6 years and could negatively impact your ability to get credit in the future.
How can I avoid going into default?
If you’re struggling to make your repayments, make sure to speak to your bank or utility company to discuss your options under their financial hardship policy. During this discussion ask how the creditor will report your repayment history if you enter into a hardship variation and request that it is not listed as default or overdue payment.
If the lender agrees to the repayment arrangement but does not agree with the credit-reporting part of your terms, you can take further action by reporting it to your provincial office of consumer affairs. If the creditor agrees to an arrangement and you are making the agreed-upon payments, you are not considered to be in default.
What happens to my score if I defer my home loan payments?
Deferring your mortgage payments frees up cash for other more pressing expenses. The important thing is to contact your lender before you miss any repayments so you can organize a deferral. The big 6 Canadian banks have agreed to offer mortgage relief for up to 6 months. However, this does not definitively mean that it will not impact your credit score. The best advice is to speak to your lender and ask what, if anything, will be reported to the credit bureau and make the appropriate arrangement for your situation.
While each lender has a slightly different policy, you will likely still accrue interest on your loan. Once you start making repayments again, these repayments will increase because you have to pay back the interest and the missed repayments. Some lenders may allow you to extend your loan term instead, making smaller repayments over an additional period.
What if I decide to access my RRSP?
If, as a last resort you elect to access your RRSP, it will not be reflected on your credit report.
What if I request a credit limit increase on my credit card?
Requesting a credit limit increase has the potential to affect your score. When you apply, your credit provider might pull your credit report, leaving what’s known as a hard inquiry. And having too many inquiries on your file over a short period of time can decrease your score.
Is there anything that can help me to manage my repayments?
If you’re struggling to make repayments on multiple credit cards or loans there are some debt consolidation options available. Debt consolidation means taking out another credit account (loan, credit card or other) and combining your existing accounts into one. Ultimately this can help you to reduce the separate fees and interest you’re being charged.
In addition to ensuring you meet the eligibility criteria for any new product, it’s important to determine whether you can afford the repayments on a debt consolidation product and that it will put you in a more favourable financial position.
How can I see where I stand now?
To safeguard your credit score you need to know where you’re at and checking it won’t harm your score. You can access your credit score through our guide or check out the services available below.
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