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Credit Consequences

How will late payments affect my credit score?

 

Your history of payments is the largest factor in your credit score.  The extent of how late payments affect your credit scores depends on how recent the late payments are, how severe the late payments are, and how frequently the late payments occur.

 

Typically, creditors report late payments in one of these categories: 30-days late, 60-days late, 90-days late, 120-days late, 150-days late, or charge off (written off as a loss by the lender). Of course a 60-day late is worse than a 30-day late, but the important thing is to avoid having your account going so delinquent that the creditor sells your account to a collection agency or it becomes a judgment.  Once done, you’ll have a significant negative event on your record and you can never again bring that account current.

 

How will refinancing and mortgage modification affect my credit score?

 

The extent of how they affect your credit scores depends on whether it’s reported to the credit bureaus as the same loan with changes or as an entirely new loan.  If it’s reported as the same loan with changes, then the impact on your credit score should be minimal and are as a result of the credit inquiry, changes to the loan balance, and changes to the terms of that loan.  If it’s reported as a “new” loan, your score will experience the additional impact of a new credit obligation.

 

How will short sale and deed-in-lieu affect my credit score?

 

The extent of how they will affect your credit scores depends on the outcome of your negotiations with the lender as to how they will report it to the credit bureaus.  Their reporting can range from “not paid as agreed” or “not satisfied” to “settlement in full” or “full satisfaction”.  Some experts believe that the number of late payments is the only impact; while others indicate that the credit bureaus have adjusted their model to make them more negative.  

 

How will foreclosure impact my credit score?

 

Foreclosures are considered a very negative event to your credit score.  A foreclosure remains on your credit report for 7 years, but its impact to your credit score will lessen over time. The important thing to remember is that a foreclosure is a single negative item, and if you keep this item isolated, it will be much less damaging to your credit score than if you had a foreclosure in addition to defaulting on other credit obligations.

 

How will bankruptcy affect my credit score?

 

Bankruptcies tend to involve several accounts and thus have the potential to have a more far reaching negative impact on your credit score than an isolated foreclosure.

 

A bankruptcy is considered a very negative event. As long as the bankruptcy is listed on your credit report, it will be factored into your score. The individual accounts included in the bankruptcy should be removed from your credit report after 7 years.  While the public records item for Chapter 7 will remain on your credit report for up to 10 years while Chapter 13 will remain for up to 7 years. 

 

How will public records affect my credit score?

 

Public records such as bankruptcies, judgments and tax liens are considered adverse by the credit bureaus. Your score can be affected by the mere presence of an adverse public record, whether paid or not.  They can remain on your credit report for up to 10 years based on what type of public record it is.