Getting into a loan modification can influence one’s credit but it will not do so in a severe manner. While it may make a slight reduction in one’s score it will work to prevent a foreclosure or bankruptcy from occurring. A foreclosure or bankruptcy can end up being worse on one’s credit than a loan modification. In fact, paying off a loan modification over time can prove to be beneficial to one’s credit.
The first way how a loan modification can influence one’s credit comes from how a lender will report one’s loan after it has been altered. The lender will have to state to credit reporting agencies that the loan was modified under a special type of plan. This loan modification plan can be a plan offered by the United States government or from an independent party. This is something that will weaken the strength of the loan because of how a person will have to get help in order to make it affordable. This in turn can cause a slight decline in one’s credit score.
However, the loan modification is made with the intention of making it easier for a person to pay off monthly mortgage payments. It is also used to make it so a loan will become current. This will work in turn to improve one’s chances of getting a better credit score down the road. The payments that one would have to make on a regular basis will be reduced, thus helping to improve one’s credit payment history over time. This is a necessity because of how a person’s credit payment history is a vital factor in determining that person’s credit score.
If payments are made on a monthly basis and are made on time the person’s lender will state that one’s loan is current and list this information with credit reporting agencies. The person’s credit score will go up over time thanks to this service and its benefit.
However, the credit rating can go down if a person fails to make payments on the loan. Late payments on a modified loan can hurt one’s credit rating even more than late payments on a loan that has not been modified.
The main goal of a loan modification is so it will prevent a foreclosure or bankruptcy from occurring. These are two things that will be destructive to one’s credit rating. A foreclosure will cause a person to lose more than a hundred points on one’s credit rating. This is due to the loss in equity in one’s home, the loss of a line of credit and a black mark showing how a person failed to pay off a line of credit. A bankruptcy, which can be used to raise money to make a mortgage loan affordable, will cause a person to lose at least two hundred points on one’s credit score. The use of a loan modification might hurt a bit but it will not hurt as badly as it could when something else happens.
Contact : 1st Foreclosure Prevention
[email protected]
Contact No: 302-358-2610
Fax: 302-358-2626
http://www.1stforeclosureprevention.com
Address: 3422 Old Capitol Trail, #1371, Wilmington, Delaware 19808
