By Jennifer Reid, VP of Automotive Marketing & Strategy Lead, U.S. Information Solutions

Many have questions about how the current landscape impacts credit reporting, particularly given the recent support from the lending community around payment deferrals, loan modifications, etc.

It’s important to note that the credit reporting industry has long had codes in place to assist consumers impacted by a natural declared disaster or other financial hardship. The industry strongly encourages lenders and creditors, also known as “data furnishers” in working with their customers, to take full advantage of these codes and report these codes to the credit reporting agencies (CRAs). Score modelers, VantageScore and FICO, treat these codes as neutral, so there should not be any negative scoring impact for consumers reported to CRAs with these codes.

Here are further resources and guidelines from the Consumer Data Industry Association (CDIA) to help you navigate through the weeks ahead:

Specific Codes Apply to Certain Consumers

Specific codes are linked to certain accounts in situations like the current pandemic, and lenders and creditors must understand the distinctions and characteristics for each. For quick reference, customers listed with an account code “58” are affected by a natural disaster, whereas customers with an account code “45” have an account in forbearance.

If lenders report using the recommended FAQ 58 or FAQ 45 guidance and report special comment AW or CP, consumers’ credit scores may be affected differently.

Forbearance Versus Deferred Payment

VantageScore and FICO note that forbearance and deferred payment scenarios have a neutral impact on a consumer’s credit score so consumers in one of these programs, as reported to the nationwide credit bureaus, should have no negative impact as a result of Coronavirus.

FICO noted:

“The placement and reporting of an account in forbearance or a deferred payment plan in and of itself does not negatively impact a FICO(r) Score. VantageScore makes clear that ‘[a] loan placed in a deferred payment or forbearance plan will not result in a negative impact.’ The same is true for a natural disaster coding: ‘[t]he net impact is that a consumer’s VantageScore credit score will not go down, either because negative information is neutralized because of the natural disaster.’”

CARES Act Relief for Automotive

Some in the automotive industry may benefit from an additional relief package from the government. The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows businesses with 500 or fewer employees to apply for a Paycheck Protection Program (PPP) or the Economic Injury Disaster Loan Program (EIDL).

Additional program features and benefits include:

• $300 billion in small business interruption loans for paid sick/medical leave, employee salaries, mortgage or rent payments, utilities, and any other debt obligations
• An opportunity for small business borrowers to obtain loan forgiveness equal to their payroll cost and costs related to debt obligations from March 1 through June 30, 2020
• Delaying payment of employer payroll taxes, relaxing limitations on a firm’s use of losses from prior years, and other tax relief to help dealers keep employees on the payroll

The automotive industry is rallying in support of one another to help everyone across the value chain – dealers, lenders, OEMs, and service providers alike.