Can my lender report my mortgage payments as late when I’m in forbearance?

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Dear Credible Money Coach,

I was in a mortgage forbearance with my lender. I sold the home and paid the entire amount off. But they now marked my credit as being late all those months. Can they do that after the fact? — Richard, Georgia

Hi Richard. Forbearance means a lender — in this case, your mortgage company — agrees to pause or lower your monthly payments for a set amount of months.

When your mortgage is in forbearance, you still owe the payments, and interest typically continues to accrue on your unpaid loan balance. Even though your mortgage lender agreed to allow you to suspend payments, according to your original agreement, they were still technically late.

When you don't pay an obligation precisely as agreed with a creditor, they can report any late or missed payments to the credit reporting agencies (such as Equifax, Experian, and TransUnion). That's why having a mortgage in forbearance is usually a bad mark on your credit reports, which negatively affects your credit scores. But there are exceptions.

If the federal government guarantees your mortgage and you received forbearance due to COVID-19, your lender isn't supposed to report suspended payments to the credit bureaus. If they do, be sure to contact the credit agencies and file a dispute. Then check your reports to make sure that the damaging information got removed from your credit reports.

If the government does not back your mortgage, you don't have as much flexibility to keep suspended payments from showing up on your credit. Check your forbearance agreement to see how your lender will report your missed or reduced loan payments. You're probably out of luck if it says suspended payments get reported as late.

That said, many lenders have made concessions due to the pandemic. It can't hurt to speak with your lender and ask them to remove a negative item from your credit report.

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About the author:

Laura Adams is a personal finance and small business expert, award-winning author, and host of Money Girl, a top-rated weekly audio podcast and blog. She’s frequently quoted in the national media, and millions of readers and listeners benefit from her practical financial advice. Laura’s mission is to empower consumers to live richer lives through her speaking, spokesperson, and advocacy work. She received an MBA from the University of Florida and lives in Vero Beach, Florida. Follow her on LauraDAdams.com, Instagram, Facebook, Twitter, and LinkedIn.