Dear Penny: My Car Lender Let Me Skip Payments, Then Said I Was Delinquent

Dear C.,

You have two separate problems here: You need to fix what seems like a clear credit-reporting error, and you need a $10,000 business loan.

I want you to think about these as separate goals because if you’re a business owner, having access to a loan may be key to surviving the difficult months ahead. If you need this loan, you don’t want to wait on the credit bureaus to correct this mistake.

I’m assuming that you got this modification because you were financially impacted by coronavirus.

In that case, the CARES Act says your lender is supposed to report your loan as current while your payments are deferred, so long as you weren’t already delinquent. Even if you were delinquent, your account is supposed to be reported as current so long as you brought it up to date.

Of course, how the CARES Act is supposed to work vs. how things have actually worked out are often two vastly different stories. Just ask all the people still waiting for unemployment benefits.

Some credit-reporting errors were bound to happen here. Lenders have been inundated with requests from borrowers in need of flexibility. They had to figure out how to comply with the CARES Act quickly with many of their staffers working remotely.

So what does all that mean for you? First off, I wouldn’t assume that your lender has or hasn’t corrected your delinquent status based on what you see on your credit report. It can take time for the bureaus to process and update your information, so a correction could well be under way.

But don’t wait around on your auto lender. If you haven’t already, you need to dispute the delinquency with each of the three credit bureaus. Include the letter you received from your financing company in your dispute.

I also wouldn’t wait on the credit bureaus to fix this before pursuing other loan options. If this item is the only negative item on your credit report and you have a letter from your car loan company saying the account isn’t delinquent, you may be able to find a willing lender.

Try talking to someone at a credit union or community bank, as they’re more likely to look at your overall financial picture instead of dismissing you based on a credit score.

Also, unless a lender explicitly told you that you were denied a business loan due to your credit score, don’t assume that your score was the cause.

You don’t say what type of business loan you’re seeking. But a lot of small businesses are seeking Paycheck Protection Program loans, which are backed by the Small Business Administration.

The SBA doesn’t have credit score minimums for this program — yet a lot of businesses that don’t have access to a small army of tax professionals have found that getting these loans can be a nightmare.

Again, working with a smaller bank or credit union will likely be the best way to explore all your loan options. Online-only lenders may also be a possibility.

In the meantime, make sure you’re getting the most up-to-date version of your credit reports by going to annualcreditreport.com. You can get a free credit report every week from each of the bureaus. Monitoring your credit reports from the bureaus themselves will give you the most accurate picture of your credit because you’ll see the actual data that’s used to calculate your scores.

Under normal times if you told me about a credit reporting error, I’d tell you to be patient. This isn’t one of those times.

Approach the credit bureaus and potential lenders with persistence, not patience, to get the fast fix you need right now.

Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. Send your tricky money questions to [email protected].