Positive effects:
- Creditors may report the deferred payment as "current" or "paid as agreed," which can help maintain a positive payment history.
- Deferring payments may give you time to catch up on other bills and improve your overall financial situation, which could reflect positively on your credit in the long run.
Negative effects:
- If the deferred payment is reported as "past due" or "delinquent," it can negatively affect your credit score.
- Depending on the lender and their reporting practices, deferred payments could be reflected on your credit report as a form of forbearance or hardship plan, which some lenders may view as a sign of financial distress.
- If the deferral program involves extending the loan term, it could increase the total amount of interest you pay and negatively impact your credit utilization ratio, both of which can affect your credit score.
To minimize potential negative effects, it's important to communicate with your lender about the terms of the deferral and ensure they accurately report it to credit bureaus. Additionally, it's advisable to make up missed payments as soon as possible to demonstrate a commitment to meeting your financial obligations.
