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How Mortgage Delinquency Impacts Your Credit Score

According to – Recently, Fair Isaac, which developed FICO scores, financepulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.

Here are the average hit your credit will take:

30 days late: 40 – 110 points

90 days late: 70 – 135 points

Foreclosure, short sale or deed-in-lieu: 85 – 160 points

Bankruptcy: 130 – 240 points

chart_credit_scoreLeft chart illustrates two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)  According to Fair Isaac, the likelihood that consumers will resume paying their overdue obligations drops off significantly after the delinquencies have reached 90 days, so most lending industry tends to regard an account differently when it has become 90 or more days late.

Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.  Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 points for the 780 score.  

Bankruptcy, the worst thing that can happen to your credit score.  In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

The Bottom Line

Despite the problems a poor credit score can cause, some financial consultant at credit bureaus still strongly recommends that people who are in financial dead ends, like totally unaffordable mortgages, it’s better to recognize that and cut your losses quickly; don’t prolong the problem.

Do what you need to do to get your finances back in order! 

Don’t worry about your credit score.


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