NAC Blog: We must protect credit scores like NAHREP mamas protect their “pollitos.”

Celebrating NAHREP familia, cultura, politics, and grassroots action

Que onda mi gente?!

Happy belated Cinco de Mayo a toda mi gente de descendencia Mexicana. And to the rest of you? Hope you had an amazing Taco Tuesday on Cinco De Mayo. It reminded me of a golden birthday where our birthday falls on the same number as the age we are becoming… except, you know… a pandemic named after a Mexican beer.

As far as this upcoming weekend goes, the happiest of Mother’s Days to all of the phenomenal working mothers in the NAHREP familia, and a very special mother’s day wish to my own mother who is currently mad at me because I don’t let her leave the house.

Protect Credit Scores through the Pandemic

In the recent NAHREP COVID-19 Member Survey, the majority of you urged NAHREP to prioritize advocating for the protection of credit scores during this pandemic and we couldn’t agree more. Few items will be more consequential to the advancement of sustainable Hispanic homeownership for years to come than the protection of credit scores. If you recall from our State of Hispanic Homeownership Report, Latinos have a median credit score of 684. Currently, many lenders are tightening access to credit and only lending to consumers with upwards of 700 credit scores, effectively cutting a large section Latinos out of the market. Additionally, Latinos are among those hardest hit by the pandemic, as Latinos are more likely to be employed in sectors experiencing the greatest number of layoffs.

In our last letter, NAHREP urged Congress to stop any negative reporting to the credit bureaus during the pandemic. Unfortunately, fears that too many consumers would opt to just stop paying their credit cards or student loans altogether led Congress to pull that language out of the CARES Act last minute.

Given the frailty of credits scores and just how critical these scores are to a person’s ability to accumulate wealth over their lifetime, it is important that we at NAHREP engage in a two pronged approach:

1. We need to lead a massive “Protect Your Credit Score” campaign with Latino consumers around the country.
2. We need to urge that congress do more to protect credit scores in this next phase 4 stimulus bill that will get voted on in June.

NAHREP has already started to work on legislative language with congressional leaders in the House and Senate to ensure that we protect consumer credit during this time. Credit scores are supposed to measure a person’s ability to handle debt. However, the current economic realities do not reflect a person’s ability to pay debt on time, but rather the tough choices families have to make as they face income reductions.

In the meantime, it is imperative that we become trusted resources during this time. Relationships with customers last a lifetime when you offer necessary guidance during hard times.

1. If you can make your payments, MAKE YOUR PAYMENTS. While future legislation might offer some protection to credit scores, missed payments will likely still be documented. Forbearance does not equal forgiveness. Any payment deferred through forbearance will need to be paid back at some point. In addition, the CARES Act does not require any creditors, besides those servicing federally-backed mortgages, to provide any accommodations. That means that late payments on student loans, credit cards, auto loans, personal loans, may have a catastrophically negative impact on an individual’s credit, regardless of whether or not they are credit worthy under normal circumstances.
2. Consumers must ensure that the disaster code is added to their credit report if they file for forbearance. Make sure that your customers ask for written proof that the servicer used the “disaster code” during the forbearance so that it won’t appear as delinquent on the credit report. It is very important that customers do this as the burden has been placed on the consumer to ensure credit protection during this time.
3. Make sure consumers are checking their credit reports and that they dispute any negative information. It is astounding how few individuals actually know what their credit score is or what is on their credit report. Encourage your customers to check their credit reports (it’s free) and send them more information on how to dispute any incorrect or derogatory information on their credit report, if needed.
4. Make at least minimum payments on debt. While any NAHREP 10 Certified Trainer would tell everyone to eliminate credit card debt altogether and pay off any outstanding balances as soon as possible, we understand that the circumstances today are different. Ensure that you and your clients are staying current on student loans and credit cards as credit scores are highly sensitive to missed payments.
5. Revisit your budget. Now is the time to revisit where every single dollar is going and anything that is not an absolute necessity needs to go. We don’t know how long the recession is going to last but right now is the best time to incorporate the NAHREP 10 and live below your means. In other words, let’s get rid of any unnecessary toys.
6. Communicate with creditors. Now is the time to use our Latino interpersonal skills to keep the lines of communication open between lenders, creditors and service providers. If you communicate with your creditors about your current situation, you might still be able to prevent major credit score damage. Help your customers go through every single creditor and make sure they give them a call. Some companies are going above and beyond to help their customers during these hard times. The worst thing anyone can do is not ask.

Time to develop a plan mi gente. This is a one two punch: customer education while also advocating for additional protections in Congress. If we want to see continued homeownership growth after this is all over, we have to protect our credit scores just as fiercely as Latina moms protect their “pollitos.” This will be one of the most important things we do this year in order to fulfill our mission of advancing sustainable Hispanic homeownership and tripling median household wealth for Latinos.

We can do this!