Credit Score Articles

The Damaging Effects of Missed Mortgage Payments

Mortgage statement with graphic of mini-home on top

For most homeowners, your mortgage is the largest line of credit listed on your credit report. Given the significance of such a large loan, lenders place a heavy weight on how you manage that account. Part of that is your ability to make payments on-time and in full. So when you a miss a payment, the impact to your credit score can be substantial.

Because there are hundreds of scoring models out there, there is no way to say exactly how many points will be knocked off your credit score when you miss a mortgage payment. However, it does help to consider the original standing, which can be a factor.

The Higher They Climb, The Harder They Fall

It seems unfair, but a higher credit score may lose more points for a late payment than a lower score. Not only that, but it can take longer to recover once the score has significantly dropped.

For example, let’s say you and your neighbor have significantly different credit scores, a 750 and a 650 respectively. What happens when you both miss your next mortgage payment? Your score may drop nearly 100 points to 660, while your neighbor’s may only reduce by 50 points to 600, depending on the scoring model used.

That being said, what’s really important is where that three-digit-number lands on the scale of riskiness versus creditworthiness. Did you go from an excellent score to a moderate score? Did you neighbor’s score drop into the riskiest category? This is what will truly impact your borrowing terms.

Paying your mortgage on time is a pivotal factor in maintaining a favorable credit score. Take measures, such as setting up a budget and automating mortgage payments, to ensure your loan obligations are met and your score is protected.