Here’s how missing a rent or mortgage can affect your credit score

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With an estimate 30 to 40 million people at risk of eviction over the next few months America is plunging into the worst housing crisis in US history.

In March, Congress passed the CARES Act, which included a temporary ban on evictions. Temporary eviction relief only lasted until July 24 and protected tenants and landlords living in homes funded by federally funded mortgages or who rely on housing vouchers.

The moratorium on evictions protected about a third of tenants; its expiration put millions of families at risk of losing their homes amid unprecedented public health, unemployment and economic crises.

On August 8, President Trump issued a executive order who simply tasked various administration officials to consider whether further measures were needed to stem the wave of deportations underway across the country.

The congress was negotiate with White House officials to reach agreement on another broad stimulus package, which could include another moratorium on evictions. So far, negotiations have failed and it is unclear when another stimulus bill will be enacted.

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Missing Housing Payments Can Dramatically Lower Your Credit Score

Almost 1 in 3 Americans failed to make full rent payment on time in July. That was before the federal unemployment benefit of $ 600 per week expired at the end of the month. Without a second incentive check of $ 1,200 in sight and reduced unemployment benefits, more Americans are expected to fall behind.

Housing, food and clothing are some of the most basic human needs. The prospect of losing a home and being kicked out on the streets is horrendous and often comes with the loss of goods and other essential services. Expulsion destabilizes the whole family unit, and this can cause families to descend further into a dangerous spiral that is almost impossible to escape; having an eviction on your public record can make it extremely difficult to find another place to live in a safe neighborhood.

However, even if you don’t worry about the eviction, missing a rent or mortgage payment could seriously harm your home. credit score or make future owners fear approving you as a tenant. However, it’s important to know that not all homeowners report missed payments to the credit bureaus.

In fact, many homeowners who own only a few units probably don’t report missed payments directly to the three major credit bureaus. However, if they hire a collection agency, move forward with eviction proceedings, or get a civil judgment against you, it’s much more likely that you’ll see the marks reflected in your report. If you have a mortgage, your lender will likely report any late payments more than 30 days to the credit bureaus.

A stocking credit score limit your ability to access credit when you need it or force you to pay more when you borrow. The damage to your credit is also not a complete story since homeowners and banks charge late fees, making it harder to catch up.

One late payment can lower your score by more than 100 points and the negative rating can stay on your credit for up to seven years. Higher credit scores are more vulnerable to significant downgrades because a lower initial credit score already takes into account previous derogations.

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Having high credit can save you money

Are you planning to buy a home, refinance your student loans, or open a credit card in the future? If so, having an excellent credit score of 760+ can get you the lowest interest rates and the best possible terms.

When it comes to big purchases like homes and cars, reducing your interest rate by a few percentage points can literally save you thousands of dollars. The Instagram image below is an illustrative example of the difference between two car loans with different interest rates.

What to do if you are worried about missing a payment

If you’re behind on your rent or mortgage, there are several things you can do to ask for help. The first thing to do is to check your lease or rental agreement to see how much time and flexibility you have to try and pay off the missed rent. Then contact your landlord or lender to see if they have a COVID-19 relief program. You should also check to see if your municipality or local state has a mortgage or eviction relief program. An online resource that you can refer to for assistance is 211.org.

In the next step, contact your landlord and determine if they are ready to set up a modified payment plan. According to Gisela Hernandez, a Texas-based homeowner, “Small homeowners are more flexible with repayment plans in the [pandemic] environment. They are afraid that they will not be able to find a qualified tenant if they evict their current tenant. “

More conventional options for homeowners include requesting forbearance if all you need is a temporary break in payments, refinance your mortgage, or looking for a loan modification to reduce the amount owed each month. You can also rent out your house to someone else to help cover the mortgage if you have a place to stay.

It’s painfully obvious that Americans need the federal government to step in and provide additional relief to help struggling families stay in their homes. It is now up to lawmakers to prevent a wave of mass evictions in the wake of the recession.

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