Mortgage Deferral Shouldn’t Impact Your Credit Score
Last year, in an effort to assist individuals facing significant financial hardship due to the COVID-19 pandemic, the federal government implemented a number of relief measures including the opportunity for Canadian lenders to allow customers to defer their mortgage payments for a set period of time. At the end of the deferral agreement, payments returned to normal and the deferred amounts were added to the mortgage balance.
A deferral simply represents a delay in payment and doesn’t imply that the mortgage is in arrears or in default as the terms of the mortgage agreement are essentially still being honored. Therefore, credit reporting guidelines implemented by Canada’s credit-reporting agencies include measures for special payment arrangements to ensure they’re flagged accordingly and not reported in the same manner as a skipped or late payment.
Lenders must ensure their customers’ payment history, including any special arrangements, is accurately reported to the credit bureaus. Nevertheless, mistakes can happen. If errors occur in the reporting system, or reporting guidelines aren’t properly implemented, a lender may report a deferred payment inaccurately. This could have a damaging impact on a consumer’s credit rating and unfairly affect their ability to obtain future credit.
Make sure your deferral was reported accurately
If you deferred payment(s) – like more than three million Canadians – be sure that the information on your credit report is accurate and up to date. Speak to your lender to verify that deferrals were correctly reported and check your credit report to ensure there are no errors.
You can request a copy of your credit report at any time from Canada’s reporting agencies, Equifax and TransUnion. If you detect an issue, take the necessary steps to have it corrected by completing a credit report update or investigation request form.
Default management tools available
While the COVID-19 mortgage payment deferral program has ended, many Canadians are still struggling financially due to layoffs, reduced wages, lockdowns, shutdowns and stay-at-home orders. If you continue to be anxious about meeting your mortgage obligations, default management tools are available to help get you through these trying times.
Initiatives such as reducing monthly payments by extending the amortization period as well as other payment arrangements are all worth investigating with your mortgage broker.
At the first sign of difficulty, speak with your mortgage broker to discuss your options and be sure to review the Default Management Tools from Canada Mortgage and Housing Corporation and Mortgage Relief Options offered by the Financial Consumer Agency of Canada.
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