It’s January 11, 2019 – the first day paychecks will not
arrive for some federal workers due to the government shutdown.
Among other worries, furloughed employees may be wondering how
missed or delayed debt payments might impact their credit if the
shutdown continues and they’re unable to pay their credit cards
or other bills on time.
The good news is, you’ve got a little bit of time. For all
credit card statements received, regardless of when, the due date
will be at least 21 days AFTER the date of the statement date. This
is a CARD Act requirement. For all other loans, the due date is set
by the lender in accordance with their policies and state and/or
Even if your credit liabilities are not paid by the DUE date,
the lender CANNOT immediately report you as being delinquent to the
credit reporting agencies, unless you are already at
least 30 days delinquent. The credit reporting agencies have a
longstanding rule that only permits delinquency reporting by
lenders AFTER the payment is a full 30 days past the due date.
There is no systemic way to accurately report someone as being
“1-29 days late.” It doesn’t exist in credit reporting.
For example: If your due date is April 15 and you do not make
your payment, the earliest your lender can report you as being
“late” to the credit bureaus is May 15.
Can government workers be protected from negative credit
reporting and credit score damage resulting from not receiving a
There are four “parties” involved in credit reporting and
credit scoring: your lenders (data furnishers), the three credit
reporting agencies (Experian, TransUnion, Equifax), credit score
developers (FICO, VantageScore), and borrowers (me and you).
Here’s how each of them might play a role.
Data Furnishers: These are companies that
“furnish” or report information to the credit reporting
agencies. These are almost always financial services companies,
loan servicers, or debt collectors.
Data furnishers are the most important party as it pertains to
the impact of late payments on furloughed or unpaid government
workers. They can choose to report late payments to the credit
reporting agencies, or choose to not report late payments to the
credit reporting agencies.
(There is an exception:
Student loan servicers that service federally guaranteed
student loans are bound by their agreements with the federal
government to report late payments to the credit reporting
If the lender/data furnisher chooses to provide some sort of
deferment or forbearance to their borrower and NOT require payments
to be made during the government shutdown, then their borrowers
would not accumulate late payments during the shutdown. That would
mean no “shutdown based” credit report or credit score
Credit Reporting Agencies (CRAs): There is no
systemic method for the CRAs to prevent late payment reporting for
a minor subset of the U.S. population simply because they have been
furloughed or are otherwise unpaid because of the shutdown. The
CRAs don’t know who is furloughed and who is not. They also
don’t know which late payments are caused by the shutdown versus
those that have been caused by something else. There is also no way
to code any particular account as being “subject to government
There’s very little, if any, direct action the CRAs can take
during the shutdown, other than advising their data furnishers on
their credit reporting options.
Credit Score Developers: Credit scores are
influenced by what appears on a consumer’s credit reports, as
reported by the furnishers. The models that are currently
commercially available do not have a facility that would allow
consumers to escape influence from the credit reporting of late
payments by lenders who have government borrowers.
There’s no exception programmed into credit scoring systems that
can differentiate between late payments caused by a government
shutdown and those caused by some other reason.
How Credit Scoring Models Actually Work
Borrowers: To the extent borrowers can continue
to make at least their minimum payments while they are furloughed,
this will protect their credit reports and credit scores from any
negative credit impact caused by the furlough. If borrowers cannot
or choose not to make their payments, they may very well end up
with late payments on their credit reports — which will remain
there for the subsequent seven years, as allowed under federal
Borrowers can certainly make the case to the CRAs that the
reason they couldn’t make their payments was because of the
government shutdown. At that point, the CRAs would likely contact
their lenders for guidance on how the account should be reported.
This is, and has long been, a standard practice when a consumer
challenges information on their credit reports. The lender can
either choose to have the CRAs remove the late payments (called a
“goodwill deletion”), or they can choose to have the CRAs
maintain the late payment(s), which would be completely legal.
Executive Order: It is possible President Trump
could issue an executive order that protects furloughed government
employees from late payment credit reporting. This executive order
could direct lenders and servicers to NOT credit report any late
payments to the credit reporting agencies for their borrowers who
are government employees.
More by John
FAQ: When Does a Late Payment Show Up on My Credit Report
- Use a
Credit Freeze to Stop Identity Thieves Cold
Three Legitimate Ways to Raise Your Credit Score Fast
John Ulzheimer is
an expert on credit reporting, credit scoring, and identity theft.
The author of four books on the subject, Ulzheimer has been
featured thousands of times over the past decade in media outlets
including the Wall Street Journal, NBC Nightly News, The Los
Angeles Times, CNBC, and countless others. With professional
experience at both Equifax and FICO, Ulzheimer is the only credit
expert who actually comes from the credit industry. He has been an
expert witness in over 230 credit related lawsuits and has been
qualified to testify in both federal and state courts on the topic
of consumer credit.
The post Credit
FAQ: Will the Government Shutdown Damage the Credit of Furloughed
Workers? appeared first on The Simple Dollar.
Source: FS – All-News2-Economy
Credit FAQ: Will the Government Shutdown Damage the Credit of Furloughed Workers?