Will Forbearance Status Affect My Credit Score?

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Forbearance -- whether on a mortgage, a student loan or some other financial obligation -- provides temporary financial relief for those who are unable to make their payments. Under forbearance, your lender agrees to halt collection of payment for a specified amount of time. That might be several months or even a year in the case of student loans. During this time, you are not obligated to make payments, and your lender will not make collection attempts. While forbearance is often used when people are experiencing financial hardships, being under forbearance in and of itself will not harm your credit score.

No Payments to Miss

  • Your credit score is based on a number of factors from your credit report, including your payment history and your current balances. When you miss payments because you don't have the money to make them, those missed payments will show up on your credit report and lower your credit score. A forbearance, on the other hand, suspends your payment obligation altogether. No missed payment will appear on your credit report, because no payment is due.

Benefits of Forbearance

  • Forbearance allows you to avoid the hit to your credit score that would occur if you missed payments and gives you a little breathing space to get your finances in order. Additionally, some creditors might not consider debt currently under forbearance as a part of your overall debt when considering whether to extend you credit. This may help you get approved for certain types of credit when your debt-to-income ratio is an important factor.

It's Not a Cure-All

  • Despite the potential benefits, forbearance is not for everyone. While it may help you get through an unexpected, temporary financial hardship -- a job loss, a reduction in income, a medical emergency -- it's not a long-term solution. If you're just not making enough money to pay your bills, you'll be right back in the same situation when the forbearance period ends. If you miss payments after forbearance, your creditor may tack on additional penalties and late fees. Simply put, forbearance will not solve your problems; rather, it will buy some time for you to solve them.

Getting the Ball Rolling

  • If you want to explore forbearance, do your homework -- and do it soon. Not every creditor will consider forbearance, and each creditor that does will have its own standards for qualifying for one. The longer you wait, the more payments you'll miss, and the bigger the hit to your credit score. And your creditor might not be willing to work with you if you're far behind. This is especially true in the case of student loans, where going into default will remove most options for resolving the debt.

Damage Can't Be Undone

  • Forbearance will not remove any existing information from your credit report. For example, if you miss two payments on an account before gaining a forbearance from the lender, those two missed payments will remain on your credit report and will continue to affect your credit score.

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