How Bad Is it to Miss a Mortgage Payment?
Experian, one of the big three credit reporting agencies, has advice for those interested in buying a home but who are wondering what the effects of past missed housing payments might be.
Naturally, this concern isn’t on everyone’s minds. Some are first-time home buyers and have never had a mortgage loan or purchased real estate before. If you’ve never had a mortgage payment in the past, the issue of late or missed mortgage payments can’t come back to haunt you later.
But it does for some. What does the Experian.com official site say about the effects of a single missed mortgage payment on your credit report? Look at a reader question posted on that site asking this very question:
“I admit I was late on one mortgage payment in 30 years, and my credit dropped 52 points. Is that normal for the credit industry, and am I stuck with that for seven years on my credit?”
Having your credit drop by “a whopping 52 points” definitely does not sound good. But there are factors that may work in your favor even if you come to the home loan process with a late or missed payment on your record (for housing).
Experian advised this reader, “Your credit scores will be negatively affected by a late mortgage payment. The number of points depends on your overall credit history and the scoring system used by the lender.” That means the 52 point credit rating drop “may not be as bad as it seems” according to the credit reporting agency.
The credit score hit from a single missed payment could be offset by otherwise responsible credit use. If you have patterns of credit use that qualified you for more competitive rates and terms on a real estate loan (prior to the missed payment) your otherwise good record could offset the one instance of a late/missed payment.
But if you have an overall pattern of late or missed payments, you will need to build in at least 12 months of time between the late/missed mortgage payment or housing payment and your home loan application. Anything less could put your ability to qualify for the mortgage at risk.
It’s true that a late payment stays on your record for seven years. But the older that incident gets, the less relevant it may be to your current creditworthiness, and lenders understand that. It’s good to know going into the FHA home loan process that time can help undo past credit mistakes if you are using good credit habits now.
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Meeting FHA Loan Guidelines Improves Your Chances
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