CARES Act: Impact on Credit Reporting & Scoring

Impact on consumer credit history

The CARES ACT only impacts how furnishers report to the bureaus in instances where the borrower and data furnisher have reached a mutual accommodation. When this occurs, the furnisher must continue to report the account status as “current”. The current status is entirely dependent of whether the account was in a positive, non-delinquent status prior to the accommodation.

By placing borrowers in a temporary deferred payment plan or in forbearance, in addition to reporting the account status as “current”, the borrower’s FICO® will not be impacted by late payments resulting from a COVID-19 pandemic hardship. The placement and reporting of an account in forbearance or a deferred payment plan in and of itself does not negatively impact a FICO Score.

When to use AW code

In instances where the borrower and furnisher have not worked out an accommodation, the furnisher may opt to report the tradeline with a special code, “AW” (“affected by natural or declared disaster”). Because this is a temporary code, the furnisher will retain the previously reported status of “current” or “delinquent”. FICO, regardless of the AW code, will continue to score as normal based upon the “current” or “delinquent” status.

The reporting of special comment code “AW” alone, however, should not be viewed as a way of providing consumers relief with respect to the FICO Score. As they are reported to the CRAs, payment status, amounts past due (if any), and balance information will continue to be important and considered in the calculation of the FICO® Score.

For loan eligibility questions, continue to consult your investor guidelines.