Why Missing a Mortgage Payment Affects Your Credit Score

Tough financial times happen. Whether it’s from an unexpected family emergency or losing a job, paying bills on time during this financial hardship is stressful. You may find yourself deciding which bill you should pay first. Let’s take a look at why it’s important to pay your mortgage on time and how it can positively or negatively affect your credit score.

Late Mortgage Payments Can Have a Major Impact on Your Credit Score

Missing a mortgage payment is a big deal. This is the moment when your credit score takes a hit. To understand the reason for this you have to understand how your credit score is calculated. Your credit score is calculated by the history of your payments and the total amount of money you owe your lenders. Payment history makes up 35% of your score and the amount you owe makes up 30%. With most homeowners, their mortgage is the largest debt they owe and most likely the loan that they will have for an extended period of time. Since these loans are usually set to 15 or 30-year terms, missing those payments can hurt your credit score.

What Exactly Does Late Mean?

Different lenders have different terms for what a late payment means. If you were to send your payment a few days late your lender might not count it as late as most lenders do give a 10-15 day grace period. However you will likely be charged a late fee. In order to be reported to the credit bureaus, your payment has to be 30 days past due. Since lenders report to credit bureaus on a monthly basis, it is important to remember never to go over the 30-day period if possible. As the time past due increases, you will see your score continue to decrease. After the 90 day past due mark, this is when foreclosure becomes a possibility.

If you’re struggling with making your mortgage payment, you may be eligible for a refinance. Our loan officers at First Ohio Home Finance are here to help! Or if you are a first time buyer and have questions about your credit and the homebuying process, contact us. We can analyze your income to let you know how much you can afford and the best options for you. Call us at 614.818.1850 to get started!