Credit card payment deferrals won’t hurt your credit score – if you get it in writing
The federal government is encouraging Canada’s banks to do more to help struggling Canadians during COVID-19: “We continue to have discussions with them that are really focused on the need for banks to do more,” Prime Minister Justin Trudeau said in a press conference Tuesday. “We acknowledged that they did go in the right direction. But we see every day that this crisis is more and more of a challenge for everyone.” Trudeau added that the government is working on other credit solutions for Canadians that will be announced in the next few days.
Last week, Canada’s five largest banks announced they would cut interest rates for some customers in response to COVID-19’s impacts on consumer finances. The move came soon after the banks announced minimum payment deferrals for two to six months, depending on the institution. But the deferral is not payment forgiveness. All banks, except for National Bank, will charge accrual interest.
These measures are aimed at helping Canadians navigate tough financial circumstances, but they also have applicants asking: Will this hurt my credit score?
The Paper Trail
“The short answer is no, it should not,” said Kelley Keehn, a consumer advocate for FP Canada and personal financial educator. But Keehn added that you must be clearly in agreement with your lender that these arrangements are deferrals – not defaults. A record of this arrangement is important to have on hand as proof of the agreement and deferred payments.
Credit unions like Equifax and TransUnion cannot keep track of all of these transactions, according to Keehn: “You want to make sure you get it in writing if you can. If you can’t get it in writing, you need to make sure you’re taking really good notes.” This includes e-mailing yourself details to keep track of timestamps and payment dates on your calendar. A deferred payment won’t hurt your credit score at this time, but a missed payment will.
Licensed insolvency trustee Scott Terrio said that having a paper trail is not only a good way to prove the agreement, it can also safeguard against errors in the banks’ credit reporting system: “We see mistakes happen all the time,” he explained, referring to the paperwork mishaps he and his clients come across at the Ontario-based debt relief firm Hoyes, Michalos & Associates.
These are mistakes made under normal circumstances. Now with a system weighed under the pressure of COVID-19, lenders’ staff are stretched thin. “If you have the paperwork, you’re good. If you don’t, they’re not going to help you.”
Equifax and TransUnion offer Canadians free access to their credit reports and encourage frequent credit checks after you apply for a deferral, though it will take 30 days to show whether the report had any impact.
How to defer your minimum payments with your bank
BMO customers can apply online and request deferral payments through the message centre. For customers without BMO online banking service set up, they can fill out a request form. Advisors aim to get back to customers within four days, according to the website.
CIBC’s approach to qualifying customers is largely on a case-by-case basis, prompting applicants to fill out a ‘request for deferred payments form’. The CIBC Advisory Team will then review the customer’s situation and discuss options.
Applications can be filed online. However, if your next payment is due within the next 48 hours, CIBC recommends that you apply over the phone.
Customers can qualify for RBC’s deferral program as long as their personal or business finances have experienced “financial hardship as a result of COVID-19”. Cardholders have the option between the two-month immediate relief benefit and the six-month longer term relief option (which requires consulting with an advisor on a case-by-case basis to see who qualifies.)
You can apply by logging into your RBC account, selecting the “Need to defer a minimum payment due to COVID-19?” option, and following the instructions there.
To qualify for Scotiabank’s deferral program, you or one of your family members must be either unemployed because of COVID-19 or have been impacted by a significant reduction in income. Beyond that, Scotiabank’s advisors review customer cases and discuss options.
Scotiabank’s website explains that relief measures like mortgage and auto payment deferrals can be done online, but for additional measures, like minimum credit card payment, would need to be made over the phone. They also warn that wait times will be longer than usual.
TD will allow its customers to defer payments for three months as long as: they are the primary account holder; the card has been open for four months and is not a business credit card; the account is in good standing without any prior delinquencies, bankruptcies, or charge-offs; and has not deferred credit card payments previously.
Cardholders can apply for the deferral online as long as they are registered with the EasyWeb service or can apply over the phone.