Does Capital One have a credit card forbearance program?

Everyone facing financial hardships could be eligible for the Capital One hardship program, according to customer service. However, Capital One’s hardship program isn’t the same for all customers. The exact terms will be based on your individual situation.

Depending on how much you owe, the reason for your troubles and how long you anticipate them to last, Capital One can help design a solution for you.… read full answer

What to Expect from the Capital One Credit Card Hardship Program

The Capital One hardship program is a temporary adjustment to a Capital One credit card’s terms to help out customers with financial troubles. This could include lowered interest rates, settlement for a portion of the total debt, or the ability to temporarily not make payments.

So, if you are having financial hardship, it is a good idea to call Capital One and ask about your options. Abiding by the terms of a hardship program will keep your account in good standing, even if you’re not making normal payments.

If you don’t pay your credit card bill at all, you will likely get charged a late fee, lose your grace period, and have to pay interest at a penalty rate. Your credit score will also go down if you fall at least 30 days behind on a credit card bill payment. If you continue to not pay, your issuer may close your account, though you’ll still be responsible for the bill.… read full answer

If you don’t pay your credit card bill for a long enough time, your issuer could eventually sue you for repayment or sell your debt to a collections agency (which could then sue you). But it’s not all or nothing with credit card payments. It’s an entirely different story if you simply pay the minimum amount required.

If you always pay at least the minimum required by your due date, your account will remain in good standing and you won’t have to face late fees, penalty rates or credit score damage. You’ll just have to pay interest on the remaining balance at your card’s regular rate.

Here’s what happens if you don’t pay your credit card:

• If you pay the minimum required but not the full balance due: Your total unpaid balance will accrue interest at your card’s normal APR. You’ll also lose your grace period, so new purchases will accrue interest right away, too.
• If you don’t pay at all: Your account will be reported as past-due to the credit bureaus after two missed due dates. That will hurt your credit score. In addition, a late fee of up to $40 may be tacked onto your balance (but it can’t exceed your minimum payment). Your issuer may also apply a penalty APR to new purchases, though they must inform you 45 days in advance.
• If you get 60 days behind on minimum payments: The issuer can apply a penalty APR to your entire existing balance.
• If you get 180 days behind on minimum payments: The credit card company will have to charge off your debt (consider it a loss for taxes). But that doesn’t mean they’ll stop trying to get you to pay. They may sell your debt to a collections agency, or they may choose to sue you.
• If you don’t pay for 3-15 years: You are vulnerable to a lawsuit, depending on which state you live in. Time-barred debt is not a valid defense until your state’s statute of limitations runs out. If you lose a lawsuit and are ordered to pay, you might have your wages or bank account garnished.

So the bottom line is that you should always try to make at least the minimum payment on your credit card. Sure, you’ll still owe interest, but you won’t have to deal with the other negative consequences of not paying your credit card at all.

If you’ve fallen behind, the most important thing to do is catch up on your missed minimum payments and bring your account back to current status. After that, your goal should be to pay your full balance due for two months straight. Though that’s easier said than done, doing so will restore your grace period and stop the buildup of new interest.

Forbearance (a modified payment plan required by financial hardship or illness) and deferment (a temporary respite from payment obligations) are perhaps best known in relation to student loans, but they’re relevant to mortgages, credit cards and other borrowing vehicles, too. The extent to which they stand to impact your credit score ultimately depends on the type of debt in question, how the lender classifies the arrangement and what you intend to use your credit score for.… read full answer

Student Loans:

You see, neither forbearance nor deferment of student loans is supposed to have any impact on your credit standing. Both will be noted on your credit report, but the major credit-scoring companies (VantageScore and FICO) say such records will carry no negative connotations. However, it’s important to remember that lenders, especially credit-card companies, often use their own proprietary credit scores to evaluate applicants. If their risk algorithms have determined that people with forbearance and deferment have an increased probability of payment problems, you can bet they’ll take that into account — at least the smart ones do.

Student-loan deferment or forbearance could also impact your credit score more directly if you miss a payment right before the arrangement takes effect. This is unfortunately common given that financial problems typically necessitate such modified or suspended payment plans. And if you don’t notice the missed payment, delinquency could fester if you assume you’re in the clear. That would, of course, take a lot of the air out of your credit score.

Mortgages, Credit Cards & Auto Loans:

The circumstances are a bit different for these types of debt. Only deferment is possible when it comes to auto loans, only forbearance applies to credit-card debt, but both can be used in the context of mortgages. In each instance, the credit-score impact will depend on how the account in question is reported as well as the state of your credit standing to begin with.

• Mortgages: VantageScore says mortgage forbearance won’t negatively impact your credit score if the arrangement entails paying either interest only or a combination of interest and a reduced principal amount over the prescribed timeframe. But if the agreement calls for no payment to be made during the forbearance period, “the trade line is temporarily excluded from active trade line calculations,” according to Vantage. “This will lower the consumer’s score by 30 to 40 points.” FICO is a bit different. Based on its policies, if a loan servicer reports mortgage forbearance to the credit bureaus “as ‘paying under a partial payment agreement,’ it could have a negative impact on a borrower’s FICO score.”

• Credit Cards: Forbearance often goes by the name of “debt management” in the context of credit cards and can include any modified payment agreement. It won’t necessarily affect your credit standing directly. But if it results in a lower credit limit or the closure of your account, it could do so indirectly by altering your credit utilization and average account age.
  Still, Federal Reserve Bank research shows that 78% of people whose credit-card accounts are reinstated following default for the purpose of completing a modified payment agreement see their scores rise by as many as 20 points.
• Auto Loans: Some auto lenders will allow for the deferment of payments due to hardship, typically for 30 days, with the skipped month being added to the end of your repayment schedule. In most cases, you will still be responsible for paying interest in the meantime. It therefore won’t get temporarily excluded from credit-scoring calculations and shouldn’t hurt your credit standing, assuming the lender properly reports the information to the major credit bureaus.

Final Thoughts:

Given the nuance that’s involved, it’s wise to take a peek at your credit report before and after entering into forbearance or deferment just to make sure everything is in order. Your free WalletHub account will also give you unlimited access to daily credit-score updates, so you can monitor how your modified payment plan impacts your standing.