Keeping your FICO Score® high right now can be challenging. As you may know, several factors make up your FICO Score®. The amounts owed, length of credit history, new credit, and credit mix (credit cards, loans, etc).
However, your score could take a sudden dive through no fault of your own.
A class-action lawsuit filed in May is alleging that a company’s mistake put the credit of nearly 5 million student-loan borrowers at risk in the middle of a pandemic. Some said their score plummeted by 100 points.
It all started with the CARES Act, a groundbreaking piece of legislation, designed to cushion the financial blow caused by the coronavirus. The CARES Act hit the pause button on all federal student loans until Sept. 30, 2020. Payments and interest were automatically put on hold to help student loan borrows keep cash in their bank accounts and counteract the economic effects of the pandemic.
Congress knew these skipped payments would look bad on a credit report,, potentially leading to a significant drop in credit scores, ordered that they be recorded as $0 payments made on time.
Best Intentions But Poor Execution
However, due to an unintended error, student loan servicer Great Lakes reported those payments as “deferred” instead.
At the time, “deferred” payments on a credit report were viewed as a negative by VantageScore, one of two major companies that calculate credit scores.
The lawsuit filed on behalf of Great Lakes customers stated the error “resulted in immediately lower credit scores and jeopardized student loan borrowers’ access to credit at this crucial time and going forward.”
Social media lit up with complaints that people’s scores were dropping by 10, 50, even 100 points.
Better Safe Than Sorry
Things like this can happen at any time. But there are ways to protect yourself.
If your credit score is still too low after fixing the mistakes — right now, some lenders are insisting on a score of at least 700 or 680 to even get a big loan, like a mortgage — you can take more steps to improve it.
Experian Boost™, is the best product to boost your FICO Score® and manage your overall credit profile. All you have to do is sign up and verify that you have been paying your bills on time (cell phone bill, cable bill, other utilities.), and you could get an INSTANT credit score boost.
Plus, it’s FREE! Some Experian Boost™ customers have seen a jump as high at 47 points in 15 minutes. We haven’t seen a more natural way to improve your credit. Results will vary, see Experian’s™ website for full details.
No one could have predicted the pandemic being so catastrophic. But, mistakes to your FICO will happen from time to time, and you should take all the precautions you can to ensure you’re prepared.