When it rains, it pours.
For nearly three years, homeowners have faced job losses, which ultimately resulted in late mortgage payments. What many don’t realize is just how much even a single missed payment can affect your credit score. In an effort to shed light on this situation, FICO has pulled back the curtain to show what the potential impact of missing just one payment can have on your credit report.
FICO examined the effect of a missed payment for what they describe as “representative profiles” that reflect typical reports. Perhaps because they do not have as far to fall, the impact for someone with a lower score is surprisingly less painful than for someone with an impeccable credit score. For lower credits scores, consumers are looking at up to 80 point decline. For the consumer who began with 780 score, however, one missed payment can shave over a 100 points off his or her FICO score. The remainder of the chart tracks how the score changes if a consumer proceeds as far bankruptcy. For the individual with the better credit rating, up to 240 points can be erased from the final FICO score. FICO’s report also probably surprises consumers when they discover that a short sale with an outstanding balance has the same impact as a foreclosure.
The second chart shows how long it can take for the consumer’s FICO score to fully recover from the hit of late mortgage payments, short sales, foreclosures and bankruptcies. Again the consumer who began with the higher credit score suffers the most, since it can take up to three years to recover from one late mortgage payment.
It is important to note that these scenarios assume everything else about a credit file remains the same: specifically that no new accounts are opened and that there are no delinquencies on payments, in addition to the mortgage. Given the unemployment rate – especially the long-term employment challenges many are experiencing – the likelihood of all these factors remaining constant, is not high.
This information may seem downright scary if you once had a good credit rating, but thanks to job loss and other extenuating circumstances, it has taken a beating over the course of the past few years. Thankfully, you don’t have to suffer from the negative consequences of a bad credit score. The trained staff at Score Crafters can help you navigate your path back to a positive credit score. Call our office today at 386-734-6670 to schedule a consultation appointment.