Deferring Mortgage Payments and Building Credit

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Credit Improvement Strategy I’ve Learned from an Equifax Representative!

Last week I had a daily Zoom call with my brokerage and an Equifax representative joined our call to go over updates on consumer credit reporting. For those who don’t know, Equifax is one of the largest consumer credit reporting agencies. Banks use Equifax to look at your credit score.

One of the topics was mortgage deferrals and how it affects your credit score and here is what I learnt:

1. Deferring mortgage payments do not affect your credit in a negative way.

It is a mutual agreement between a lender and a client. Lenders will not report deferrals as missed or late payments.

2. Payment deferrals will be reflected on your credit bureau.

It may prevent you from getting new credit while you are deferring your payments. While you defer your payments it will show as if you are making “$0” payments towards your mortgage. It may prevent you from getting new credit while you are deferring your payments.

3. Deferring mortgage payments can help you improve your credit.

This is a very interesting point that the Equifax representative shared with us. He said that he is currently deferring his payments to improve his credit score.

Here is how it works:

One of the biggest factors that affect your credit score is your unused available credit. Everything else being equal, someone who has a total credit limit (lines of credit and credit cards) of $100,000 and the balance of $90,000 will have a lower score than someone who has a $100,000 and $80,000 balance.

While deferring payments, some people choose to pay their credit cards and lines of credit. It decreases their balance and improve credit score.

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