Borrowers with late mortgage payments don't have any idea how much it will affect their credit scores and how long it takes to repair the damage.
Credit or FICO scores help banks and other lenders determine a borrower's credit worthiness. FICO scores are broken down into 5 categories namely payment history, amounts owed, length of credit history, new credit and types of credit used. Payment history has the biggest impact on a borrower's FICO scores. A missed payment will have the longest and lasting impact on the score. The more recent the missed payment occurred, the greater the impact and the more missed payments you have, the longer it will take to restore the scores. (Source: www.realtytimes.com)
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| Source: http://www.myfico.com/crediteducation/whatsinyourscore.aspx |
If a delinquent home buyer wants to buy another home, their low FICO scores may keep them from qualifying for good rates. Borrowers with poor credit may pay higher interest rates, or worst, they might not be able to qualify for a loan at all. Not only that, they will also pay high interest rates on all credits i.e. car loans and credit cards. It will take years to get back on track again.
For delinquent buyers that want to improve their FICO scores, pay all your loans on time. Use at least one credit card and pay in full each month to avoid finance charges. The on time payments will offset negatives from the past.
Over time the credit scores will improve. The length of time it takes to repair the damage will depend on how serious the non-payments were.
For more information on FICO scores, please contact me for a list of preferred lenders whom specialize in structuring a successful path for home ownership.
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