People who owe money are often reluctant to talk to their creditors. But having conversations about mounting debt is essential when it comes to mitigating credit problems — during the pandemic and at other times, Laura Royer told housing counselors and educators during her course, "Protecting Credit and Avoiding Scams During the COVID-19 Financial Crisis." Royer, who has 20 years of experience in housing, financial capability, education and coaching, offered many tips during her 90-minute session, a part of NeighborWorks America's inaugural Virtual Training Institute. The course will be offered again in October.
"The CARES Act allows for creditors to make accommodations of payment options," Royer says. "If the client is current and they get a payment arrangement with their creditor, that creditor must report that they're still paying as agreed. Here's the catch: If your client is delinquent, they can't get this benefit until they bring their account current. If the client wants the benefit of protecting their credit, they have to bring the account current first."
The protection lasts 120 days past the declaration that the COVID-19 emergency is declared over. But it hasn't been declared over yet, Royer says. "They have a lot of time for this protection. As housing counselors, we need to be the ones disseminating this information."
She pointed out that creditors can make a notation that the borrower's loan is in forbearance. So, while credit scores may be safe, it may be harder to refinance, she says, or it may lead other creditors to lower credit limits. The client should track their correspondence with the creditor and find out how the creditor plans to report information to credit bureaus.
Royer focused on positives during her course. Clients have access to a free credit reports weekly, she says. "Boom!" That lets clients make sure creditors are doing what they've promised, and reports should be reviewed for accuracy of information. "We want them to look for incorrect reporting of account status," she says. "They want to make sure credit limits haven't changed." Look for unusual activity or fraud.
But while there are positives, there's also a need to work hard to make sure clients can keep their finances in check, especially if they have a change in circumstances.
Royer reminds:
- Create a crisis budget. "Cut out all of the extras, all of the fat."
- Work with clients to identify the debts they have. Identify those debts as secured and unsecured and prioritize whether those debts are high priority (rent, mortgage, etc.), medium priority (student loans, etc.) and low priority (credit cards, subscriptions and more).
- Create a debt management plan. Discuss options with clients. Can they change due dates? Create a payment plan? How will their account be brought into good standing? Make sure the client understands the consequences of nonpayment.
Paying bills is important, she says. "But sometimes, they can't. Sometimes [debt] management is prioritization. If they have no money coming in, how will they pay the bill?"
She also addressed scams and protecting credit, urging counselors to warn clients about fraud. There have been so many scams related to COVID, she says, everything from fraudulent unemployment to offers to "fix" your credit. Royer herself got three robocalls about social security while she was preparing her course. "There is an increase of scams preying on people," she says. "They're preying on people's fears."
Because people are shopping and working online more than ever before, online skimming of phishing scams are occurring more than ever before, she says. "It's important our clients understand this can happen. They need to be watching their bank accounts, getting those credit reports."
It's critical to share with clients that texts, email messages and robocalling offering cures or home testing kits are also common, she says. The coronavirus scams website keeps track of many of these. Other scams include offers of financial relief like fake stimulus checks or college loans, investment scams offering "quick money," medical cures, rental scams, cleaning scams, and more.
"If someone asks by phone, in person, text message or email for personal information like social security numbers or credit card information, "that should be a red flag," Royer says. "If it sounds too good to be true, it is."
For further scam resources, visit the NeighborWorks tips page.
