5 Things to Know if You Miss a Mortgage Payment

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too many bills

This week, Quizzologists took a look at a problem that’s sadly become more common the past few years—missed mortgage payments. With a down economy, making ends meet has gotten a lot tougher for many Americans, and regrettably, many have found themselves slipping behind on their house note. But since your credit scores rely on complex algorithms designed by three credit scoring agencies, respectively, it’s tough to know just what’s going on behind those proverbial closed doors.

What’s the real damage done? How much will a late payment lower your score? What if you’ve been good otherwise? Like a lot of things related to building and maintaining good credit, there’s no single answer—it depends. While that may sound even less confidence-inspiring, there are still several important things you should know about this unfortunately more frequent and often costly mistake.

Since the credit agencies themselves do the scoring, Quizzologists figured they know best. That’s why we went straight to the horse’s mouth and found out the following five things about missing a mortgage due-date from one of the troika of credit scorers, Experian:

Your credit score will take a hit. Exactly how much of a hit depends on your previous payment history, credit utilization ratio, and all the other factors that build your score in the first place. The better your score and habits to begin with, the less damage done. But it’s not uncommon for a score to get knocked down by as much as 100 points for even one missed payment, so you’re playing with fire. Lesser point-docking is possible, but it’s likely to still be quite noticeable.

“Range of risk” matters—a lot. Nobody wants to lose credit score points, but remember, your score is a means to an end: favorable borrowing terms. A loss of 50-100 points could take you out of the sweet spot for good rates from lenders, placing you in a tougher spot in what’s known as the range of risk. It’s not the points you lose necessarily, it’s where you end up afterward.

That’s gonna leave a mark. This one’s a bummer. A missed mortgage payment is going to stay on your credit report for seven long years, haunting and taunting you, “remember that time, seven years ago? When you were late on your mortgage? Boy, I sure do.” The key thing here is to pay it ASAP, and make a blood oath never to do it again. One payment is an accident, but not necessarily a fatal one. Two is flirting with calamity.

Time heals all wounds. If you missed a payment, while the stain stays for seven years, it also fades with time. The more distance you’ve put between yourself and that dark day in your mortgage history, the lesser the effect. So your score will repair itself over months and years, assuming you’ve been on your best behavior since.

It’s about the long haul. Now, we’re not advising you throw caution to the wind and miss a payment on purpose, but if you’ve strayed from the straight-and-narrow just once, you can still dance at the good credit party. Like most things relating to building credit, it’s about the big picture. Nothing substitutes for an on-time payment history, so one mistake in twenty years won’t bury you, but as mistakes go, it’s still a bad one you’d be better off avoiding.

While the mystical particulars of credit may seem cloak and dagger sometimes, the fundamentals are usually pretty uniform. The negative impact of a late payment varies a bit from report to report, but the solution is always the same: strive to do better and don’t make the same mistake twice, (or, yikes, three times). As always, Quizzle will be here with your free credit reports and scores so you know where you stand…or, at least, where you’ve stumbled. But we can help with that, too.