One of the biggest debts you’ll ever owe is a home mortgage that is why it can be tough on someone’s budget. Before your sign a mortgage contract, find out what a mortgage can do to your credit.
When is Mortgage Good to Your Credit?
Mortgage affects credit scores positively if you are able to keep a clean and update payment history. Even if you have a mortgage, but your payment history is solid and good, your creditors will not question your credit standing if in case you need to apply for any credit or credit limit increases. Some creditors reward good borrowers with special credit arrangements and benefits.
Late Mortgage Payments
An approved mortgage is a major part of your credit report. Paying your mortgage early or on time will help you maintain a good credit score. If you’re unable to pay on time, your lending institution can give you a 15-day grace period to give you the opportunity to update your payment for the month. Your lender will charge late payment fees on top of your repayment amount if you go beyond the grace period. In addition, your lender may report you to the credit bureaus if you pay past the grace period and if you constantly fall behind on payments. Late payments can lower your credit score.
Non-Payment of Mortgage
Non-payment of mortgages could definitely pull your credit scores down. One missed payment could mean a deduction of up to 100 points from your credit score card. If your credit score is not high to begin with, a credit dive will pose serious problems to you and your credit standing. Late mortgage repayments and non-payments of mortgages will lower your chances of qualifying for future mortgage applications. Creditors will dwell on your payment history and will take note of your late payments and non-payments. This could even prolong the application period and may result in higher interest rates should they decide to approve your loan.
Refinancing a Mortgage
Refinancing a mortgage is not necessarily a threat to your good credit standing. However, if you’re always refinancing your mortgage, the bank will recall your credit report and subject it to further inquiry. This happens, especially if you keep submitting applications simultaneously to different creditors, the bank may see this as an indication that your credit standing is weak. Another disadvantage of refinancing is that you may lose credit benefits attached to your old mortgage account, which happens with long-term mortgage accounts. Refinancing will also increase your credit usage because of the new and bigger loan take-out. This will affect your credit report and could lower your credit score by at least 50 points.
How Does a Missed or Late Mortgage Payment Affect My Credit Score?http://getprequalified.com/article/105258/credit_repair/how_does_a_missed_or_late_mortgage_payment_affect_my_credit_scores.html