How Much Does One Late Mortgage Payment Hurt Your Credit Score?

How Much Does One Late Mortgage Payment Hurt Your Credit Score

How much does one late mortgage payment hurt your credit score? Is one single mistake the end of everything? In many cases, the answer is no. When you make one mistake, you are often forgiven — provided the mistake truly was an isolated incident.

Unfortunately, the same is not true when it comes to mortgage payments and your credit score. When you make even one late mortgage payment, it can have a significant negative impact on your credit score, and the forgiveness comes much slower.

How Much Does One Late Payment Hurt You?

When it comes to your credit card payment, a single late payment may not have a big impact on your score. After all, a credit card payment is often relatively small. But a late mortgage payment seems to be a bigger deal.

In 2011, FICO shared the results of a study it conducted, looking at the impact of late mortgage payments (and other actions) on credit scores. The study examined three different credit profiles of those with good to excellent credit, and broke down different mortgage-related delinquencies. Not only did the study look at the impact of a missed mortgage payment, but it also tackled how long the recovery time would be.

Below, are two charts that illustrate the point:

FICO Impact of One Late Mortgage Payment on Credit Score

As you can see, even if you have pretty good credit, your score can be taken down a few notches just by a single missed mortgage payment. If you are 30 days late on your payment, your 780 credit score can plummet to between 670 and 690. That’s a potential drop of more than 100 points. On top of that, it can take someone with good credit about three years to recover the excellent score.

All because of one mistake.

The question is, how soon will a late mortgage payment be reported to the three main credit bureaus – Experian, Equifax, and TransUnion – once you have missed a payment due date. In many cases, there is some leeway (perhaps a few days) but since this is not guaranteed and is up to the discretion of the lender, it’s best not to count on getting any leeway. Rather, it’s best to avoid making any mortgage payments even one day late.

Another thing I found interesting about FICO’s study results is that it takes less time for someone with credit on the fair/good bubble (680 score) to recover from a mortgage payment mistake. Not only is the credit score less impacted by a payment that is 30 days late, but it only takes nine months to recover. The same is true of a payment that moves into the 90 days late range, while the person who starts with a 780 credit score might have to wait seven years to recover from a delinquency of that magnitude.

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Can You Make the Mortgage Payments?

If your credit rating is important to you, one of the best things you can do is make your payments on time. You should especially pay your mortgage on time. A good credit score can make it possible to obtain favorable interest rates on any future loans you may need. It can also lead to savings on your car insurance, and help you avoid certain penalties when getting cell phone or Internet service.

Before you commit to a mortgage, you want to make sure that you can truly afford it. Can you make the mortgage payments with ease? If something changed in your financial situation, could you continue to make your mortgage payment? Currently, my mortgage payment is about one-sixth of my monthly income. If I experience a financial setback, I could still make my mortgage payment. The setback would have to be devastating for me to pay late.

If you need help with saving money and tracking your monthly budget, it may be worth taking a look at our Budgeting Tips resource center.

And if you’re in the process of applying for a mortgage, be sure to consider all your other obligations, and determine whether or not you can add a mortgage payment to the mix. Remember, too, that homeownership is about more than just paying the mortgage. You’ll have other new costs, from property taxes and higher utility bills to maintenance and repair costs. Make sure you can handle all the costs of owning a home before you buy.

Hopefully this has helped you answer the question “How much does one late mortgage payment hurt your credit score?” Keep in mind that one mistake paying your mortgage can have major credit consequences. And if you have specific questions on this topic, post them in the comments below.

Image credit: karenr

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  • Emma

    I rent my house to my sister but for a few months last year she paid my mortgage 3 days late, I am now trying to remortgage but have been refused how can I tell them it was not my fault as my sister was paying it at the time

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Emma, that’s a tough situation. Unfortunately, the lenders don’t usually distinguish between who was supposed to be paying the bills. What they care about is the name on the loan, and if the payments are not made on time and in full then the consequences are felt by whoever’s name is on the loan. You can try calling the lender and explaining the situation, but I can’t say for sure if they will be willing to help you. Best of luck!