A deferred account is one where payments have been officially postponed under the terms of the loan agreement, often due to school enrollment, military service, or financial hardship. Deferment is common with student loans and some installment credit products, and must be reported accurately to avoid misrepresenting the consumer’s financial status or triggering unintended negative credit effects.
What Is Deferment?
Deferment is a temporary suspension of required payments, during which:
- The borrower is not considered delinquent.
- Interest may or may not accrue, depending on the loan type.
- No regular payment is expected unless otherwise specified.
Steps for Reporting Deferred Accounts
1. Reflect the Deferment Using an Account Status of “Current”
If the consumer was current at the time deferment began and remains in compliance, the account should continue to be reported as “Current” throughout the deferment period. This ensures that the borrower is not penalized for not making payments that are not required.
2. Use Special Comment Codes for Deferment
Apply the correct Special Comment Code to clearly indicate the status of the account. Options include:
- AU – Account in deferment
- AW – Affected by natural or declared disaster (if deferment is disaster-related)
- CP – Account in forbearance (if applicable to the nature of deferment)
These codes help furnishers communicate that the consumer is not delinquent, but the account is temporarily inactive in terms of payments.
3. Set the Scheduled Monthly Payment Amount to Zero (If Appropriate)
If no payment is due during the deferment, the Scheduled Monthly Payment Amount should be reported as $0. This prevents misinterpretation that the consumer has missed required payments.
Other Key Considerations
- Balance Reporting: The current balance should continue to be reported as normal unless the loan terms require otherwise.
- Payment History: Preserve the historical payment data from before deferment. Do not erase or reset past history.
- DOFD (Date of First Delinquency): Do not reset the DOFD during deferment. This field is only updated when a new delinquency occurs.
Compliance with the FCRA
The Fair Credit Reporting Act requires furnishers to report:
- Accurately: Use correct status and comment codes to represent deferment truthfully.
- Completely: Include all necessary fields such as balance, payment history, and scheduled payment amount.
- Timely: Report any changes, such as entry into or exit from deferment, on the regular reporting cycle.
Impact on the Consumer’s Credit Report
- No Negative Impact If Properly Reported
Deferment does not hurt a consumer’s credit score if reported as current and compliant with loan terms. - Provides Transparency to Future Lenders
Using the correct comment codes ensures that future creditors understand why the account shows a gap in payment activity. - Preserves Credit History
Keeping the payment history intact helps consumers retain the benefits of long-standing accounts.
Conclusion
Reporting accounts in deferment requires a careful balance of clarity and compliance. By maintaining a “current” status, applying appropriate comment codes, and reflecting accurate balances and payment expectations, furnishers protect consumer credit profiles and fulfill their obligations under the FCRA. Transparent reporting not only benefits consumers—it builds lender confidence and fosters a more reliable credit system.