Mortgage Troubles Destroying Credit Scores

If you walk away from your mortgage, your credit will be thrashed for years. If you are late on your mortgage payments, your credit score will take a severe dip.

What you do about your mortgage troubles will have varying effects on your credit score.

What type of mortgage modification will help your score? If you put your late payments and penalties into the principal you own on the house.

Refinancing tends to have almost no effect on your credit score, whether you use Obama’s HARP program or whatever.

Short sales tend to lead to huge drops in credit scores.

Walking away from a mortgage will drop your score by about 150 points, and this will stay on your credit history for up to seven years.

Bankruptcies lead to a 360 point drop and will stay on your record for ten years.

The mortgage industry meltdown has led to fewer people with great credit and more people with mediocre or bad credit.

From the Los Angeles Times:

The Vantage credit score, the primary competitor to the long-dominant FICO credit score, rates borrowers on a scale range of 501 (subprime, the highest risk) to 990 (super-prime, the lowest risk). Unlike Fair Isaac Corp.’s FICO scoring system, whose scores can vary by 50 to 100 points based on which bureau supplied the underlying credit data, Vantage scores are about the same for each consumer.

When homeowners negotiate a short sale with lenders, they sometimes assume that there will be relatively little effect on their scores. After all, the loan was successfully paid off, there was no foreclosure, and the lender voluntarily agreed to accept a lower balance than was owed.

About Luke Ford

Raised a Seventh-Day Adventist at Avondale College in Australia, Luke Ford moved to California in 1977. He graduated from Placer High School in 1984, reported the news at KAHI/KHYL radio for three years, attended Sierra College and UCLA, was largely bedridden by Chronic Fatigue Syndrome for six years, and converted to Judaism in 1993. From 1997-2007, Luke made his living from blogging. Living by Beverly Hills (Alexander90210.com), he now teaches the Alexander Technique (moving the way the body likes to move). Lessons cost $100 each and last about 45 minutes. In 2011, Luke completed a three-year teaching course at the Alexander Training Institute of Los Angeles. His personal Alexander Technique website is Alexander90210.com. Luke is the author of five books, including: » The Producers: Profiles in Frustration » Yesterday’s News Tomorrow: Inside American Jewish Journalism
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