Financial Literacy: Mortgage deferrals appear on credit report

If COVID-19 has negatively impacted your finances and you’re currently deferring your mortgage payments, you should know that this will be visible on your credit report. Here is an example from a recent credit report (original Equifax image has been modified):

     MORTGAGE
          Affected by natural or declared disaster
          Months reviewed is greater than 24
               Previous reportings: 02     Portfolio type: M     Payment frequency: Deferred
               11
               Previous reportings: 33     Portfolio type: M     Payment frequency: Monthly
               111111111111111111111111111111111111

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In this scenario, it shows that the mortgage was paid as agreed monthly for 33 months before being deferred for the last two months. It also shows that mortgage payments are currently in deferral.

Some may consider the credit bureau reporting a deferred status as good news. As COVID-19 hit like a freight train, many financial experts wondered about reporting errors on credit bureaus as a result of deferred payments. The fact that there is a system in place to report deferrals is a good sign.

Deferring your mortgage payment won’t lower your credit score, but reporting errors from deferrals might. Once you’ve resumed your payments, it’s a good idea to get a copy of your credit report to check for errors.

So, why does this matter to me now?

If you’re considering a change to your mortgage, most lenders will be very hesitant to consider lending you new money when you aren’t able to make your existing mortgage payments. This will be the case if you are looking to move into a new property, renew, or refinance your current mortgage.

So, if changes to your mortgage are on the horizon, it might be a good idea to resume your regular mortgage payments before seeking a new mortgage.

Cait Holmes is a mortgage broker in Powell River.

 
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