How a Late Mortgage Payment Affects Your Credit Score

Posted on July 24, 2010
Filed Under Credit Score, Late Payments | Leave a Comment

Put quite simply, your credit score is a system that is supposed to reflect to future potential lenders just how good, or bad, a credit risk you will be for them. If you are a good credit risk then they are more likely to get their money paid back on time, but a poor credit risk increases the chance of late payments, defaults and even repossessions.

This means that a poor credit score can mean that you might not be offered a mortgage or loan when you next apply, or that if you are offered the cash, then the reward might be a higher APR, which will cost you a fortune over the years.

So just how will missing a payment affect the score? Well, this is what the lenders are trying to work out from the score – whether you are liable to miss payments or make them all on time. This is what the credit score is trying to indicate to lenders and, therefore, missed payments will be reflected.

But, there are degrees of missed payments. If you just forget a single payment, but it is made a day or so late, then it could even be that the lender does not notice the delay and does not even record it on your publicly available credit rating.

However, at the other extreme if you are defaulting frequently or even worse you have some of the loan written off instead of paying the loan in full, then this will affect your credit score and in quite a strong way.

Even these so called ways of getting out of debt by legal loop holes, that might sound a great idea at the time, ultimately mean a whole pile of missed payments and the lender writing off the debt. They are not just going to walk away from this, they are going to record the missed payments on your credit score so that future lenders may not be willing to deal with you at all.

So it is all in balance. A late mortgage payment could affect your credit score, but it depends on how late your payment is and how often you make late payments. If you know that you are not going to be able to make a future payment it would be worth speaking to your lender so that they are aware of your situation and could even offer you a mortgage payment holiday. This is a way of missing a payment with their permission. And because it is with their agreement, it is not going to affect your score at all.

Your credit scoring is all about how you manage those debts. Odd slightly delayed payments should only have a minimal affect on your credit score, but the effect rises as your frequency and lateness of repayments increases. The aim being that if you miss a lot of payments, other lenders know not to lend to you.

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How a Late Mortgage Payment Affects Your Credit Score

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