Most people who attempt a loan modification are homeowners who are already delinquent on their payments. One missed mortgage payment will have a negative affect on your credit score. Whether or not a loan modification will affect your credit score depends on the kind of program you are being offered and how the lender reports the account.
Loan modifications, particularly those endorsed by the US Government, such as Home Affordable Modification Program (HAMP), may have no impact at all. These programs include loan-reporting requirements that result in the mortgage continuing to be reported as current and paid in full, if the requirements of the program are met by the homeowner.
“If the account is reported as anything other than “paid on time” and “in full” it will have a negative impact on your credit score.”
Other “loan modifications” could hurt your credit score because they are actually debt settlements. Three pieces of information associated with the loan modification affect your score:
(1) Credit inquiry
(2) Change to the loan balance
(3) Changes to the term of the loan
If the account is reported as anything other than “paid on time” and "in full" it will have a negative impact on your credit score. If it is reported as a “new” loan, your score could still be affected by the inquiry, balance, and terms of the loan- along with the additional impact of a new “open date”. A new or recent open date typically indicates that it is new credit obligation, and as a result, can impact the score more than if the terms of the existing loan are simply changed.
Before entering a “loan modification” in Fort Lauderdale or Miami, be sure to have an experienced South Florida loan modification attorney carefully review the terms of the modification and understand how your payment history will be reported.
For more information on how to protect yourself from the consequences of a loan modification, contact The Hershey Law Firm, P.A. at (954) 303-9468.