Thursday, April 22, 2010

What Happens To My Credit Scores If My Loan Payments Are Late?

Ever wonder just how much of a hit your credit score would take if you went into foreclosure, did a short-sale, etc.? Fair Isaac, the developer of the software which calculates credit scores, has always been very secretive about its scoring matrix. But today they released a chart to try and explain how mortgage delinquencies effect credit scores.

Fair Isaac created two hypothetical borrowers. The first had a starting credit score of 680, the second had a score of 780 (scores range from 300 to 850).

Borrower number 1, the one with the 680 score, had 6 credit accounts, while borrow number 2 had 10. The consumer with the 780 score had no missed payments other than the mortgage; the 680 example had two late payments before they failed to pay the mortgage.

After a mortgage delinquency, the two scores would look like this:

• After 30-day delinquency, 680 score drops to 620 to 640; 780 score declines to 670 to 690.

• After 90-day delinquency, 680 score falls to 595 to 610; 780 score goes to 645 to 665.

• After foreclosure, short sale, or deed-in-lieu, 680 goes to 575 to 595 and 780 drops to 620 to 640.

• After bankruptcy, 680 drops to 530 to 550; 780 declines to 540 to 560.

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