Do Modifications Hurt Your Credit Report?

Several years ago I would have said NO!!  Today banks are being a bit ugly on how they are reporting to credit bureaus.  These servicers are showing modification documents in which it gives the servicer the right to report the mortgage as being modified from its original terms.  This is an adverse statement for credit scoring.

Be careful when you modify.  Check the terms for modifications and ask the servicer how they will report this.  One servicer has a trial period of three reduced payments while the modification process is being reviewed.  During that time the agreed payment is not being posted to the account.  It shows then that you are in default even if you continued to make your payments.  If approved the lender adds the negative to the principle balance. If you are not approved, the lender has the right to accelerate the loan. 

Don't take these modifications lightly. I have always said that modifications are better than refinancing.  Now I would say that if you plan to stay in your home for another ten years go ahead and modify but remember your credit score could go down.  However the more payments you make on time the higher the score would go.  If you do not plan to stay in your home then you need to refinance to keep your score high.  If you do not qualify for refinancing then go ahead and modify anyway to keep your home affordable. 

If you are in a hardship situation because of job loss, medical bills or other occurances, call your bank or servicer immediately.  There are plans and options available to you in that servicers are getting new programs all the time.  You could possibly qualify for one of them.  Remember the housing crisis is not over yet.  Hang in there.

You can go to my websites for more information.  www.affordable-home-refinance.com or www.empiremortgagecolorado.com  and let us help you. 

Have a great and safe holiday and remember our Fallen Soldiers and their families this Memorial Day.