When examining your various expenses and the potential impact on your credit score, it is likely not surprising that mortgage payments can have a major impact. When examining the impact of a mortgage payment, it is important to understand what a mortgage is and why it is considered such a major factor in your credit score.
What Is A Mortgage?
In its most basic terms, a mortgage refers to a loan that an individual or family borrows to cover the payment of a home. Because it is considered a loan, the mortgage includes the agreement that the lender can take the house, should you fail to make the monthly payments within a specific amount of time. The monthly payment is typically determined by several factors, including the amount a home is purchased for, the homeowners’ credit score, the interest rate of the loan, and things like property taxes.
What Happens If You Miss Mortgage Payments?
After securing the mortgage, it is important to understand what could happen if you miss any payments. For example, if you miss one payment but are able to get the overdue amount paid within the month that it was due, there is a possibility that it will not impact your credit score. This will likely be the case if the overdue amount is paid off in less than 30 days from the original due date. While this may be the case for some homeowners, it is important to communicate with your lender regarding the rules.
In instances where the overdue amount is over 30 days late, or you are behind on more than one payment, these could potentially impact your credit score. In most cases, payments of any amount that are over 30 days late will likely be reported on your credit report.
What Are The Impacts Of Missed Payments On Your Credit Score?
There are a number of ways that your credit score can be negatively affected by missed mortgage payments. Late mortgage payments are considered to be a significant factor with credit scores and can remain on a credit report for up to seven years. Having this on your credit report can make it more difficult to secure future loans, which can make it more difficult to invest in things like new cars. Additionally, it can cause a noticeable decrease in the score, which impacts a number of things.
Another factor to consider after missing payments is if there are any other overdue payments that could further hurt your credit score. You should confirm that any other debt or loan payments, which could include car payments, student loans, or utility bills, are current and have no outstanding balances. Ensuring that other payments are current can help reduce the long-term impact on your credit score.
If you are concerned about missing a mortgage payment, communicate with your lender to see if there are any payment plans that can be utilized. They can also work with you to create a payment plan that makes sense.