Can Missing One Mortgage Payment Affect Your Credit?

 In Blog, Real Estate Questions

Missing a single mortgage payment really can damage your credit score.  Though you already own a home, you still need a solid credit score to qualify for an auto loan, snag a job that requires handling cash and qualify for additional lines of credit.  Let’s take a closer look at why it is so important to pay your mortgage on time.

 

 

The Basics of Missed Mortgage Payments

Miss a home mortgage payment and you run the risk of your lender reporting the delinquency to credit bureaus.  However, if you miss a mortgage payment by merely a day or two, there is a chance the lender might not report this minor lapse. As is often said, life happens.  You might get into a car accident, have a family emergency or simply forget to make the monthly mortgage payment.  If you miss your mortgage payment, reach out to your lender as soon as possible to explain what happened.  Ask the lender to refrain from reporting the lapse. 

 

 

The Ramifications of Missing a Mortgage Payment

Miss one or several monthly mortgage payments and your credit score will drop in due time.  Missing a single payment has the potential to result in a credit score decrease of 90-110 points for those with a credit score in the range of 780 on up.  Unfortunately, this credit blemish will remain on your credit report for seven years. 

 

 

Is there any Leeway for Missed Payments?

In general, the majority of home loan lenders will not report a missed payment unless the account is more than 15 calendar days past due.  However, there is no guarantee your lender will wait until 15 days have passed to take action.  If you are more than 15 days late on your payment, the servicer will likely charge a late fee.  The late fee is applicable each month a payment is missed.  This late fee is significant, typically tacking on an additional 5% to the overdue balance.

 

If you are 30 days late on your mortgage payment, the lender is likely to report your delinquency to the credit bureaus.  This is significant as your credit rating will decrease.  If you are 36 days late on your mortgage payment, federal law mandates the servicer attempt to contact you.  If you do not respond, the servicer might transmit a Notice of Default that provides 30 days notice to provide payment for the original balance due along with accumulated interest.  Be sure to check your state’s specific laws to determine if you have additional time to make payment arrangements prior to foreclosure.  When in doubt, over-communicate with your lender!  The majority of mortgage lenders are willing to work with those who miss mortgage payments to get the payments current.

 

Fail to work out a plan with your lender to make your payments current and the government will mandate the servicer assign a company employee to your file.  This individual is forced to provide assistance options and respond to your questions.  One the 60-day mark is reached, your late fees will likely be doubled.  Reach the 90-day mark and the lender will transmit a demand letter stating the mortgage must be made current or it will be foreclosed.  Fail to make payment arrangements with the timeline detailed din the demand letter and your lender will schedule a foreclosure in which your home is sold and you are forced to find a new living space.  It will be challenging to find a decent place to live now that your credit score has taken a hit.

 

 

The Damage to Your Credit Score

Miss a home mortgage payment and your credit might be dinged by about 50-100 points.  This is not a significant decrease as most people have a credit score between 650 and 800.  There is some irony in the fact that those who have good credit will likely suffer a credit ding greater than those with average credit.  As an example, an individual with a credit score of 800 will likely endure a 100 point drop after missing his or her home mortgage payment for a month.  Alternatively, a homeowner with a 680 credit score who misses two monthly mortgage payments will likely endure a 60-70 point decrease.

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