How Bad is a Late Mortgage Payment for my Credit?

By Gina Pogol
Mortgage Credit Problems Columnist

Jim Asks: Dear Gina, I was planning to refinance my home but paid my mortgage late last month. Will being late once give me bad credit? Lenders don't like to see late mortgage payments, I know.

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Gina Says:

Dear Jim,

There are several things to consider when determining the effect of a single late payment on an account.

Bad Credit Mortgage Tip: Late Isn't Always Late

First, you might not have a late mortgage payment on your credit report after all. If your payment is due on the first and late after the 15th, you would have to pay a late charge if you paid on the 20th. However, if you paid before the 31st, you would not be reported as late to credit reporting agencies.

Mortgage Lates Don't Always Equal Bad Credit...

Second, the effect of a single late mortgage payment is not cut and dried; it must be evaluated in the context of your entire credit history. While FICO states that a 30 day late payment can subtract as many as 110 points from your credit score, a single late payment wouldn't necessarily blow your refinance out of the water. However, the fact that it occurred very recently means it counts more heavily against you than it would otherwise. Fannie Mae states in its underwriting guidelines:

Credit histories that include recent late payments represent a higher credit risk than those with late payments that occurred more than 24 months ago. When there are payments that were 30, 60, or 90 days (or longer) past due, the lender must determine whether the late payments represent isolated incidences or frequent occurrences.

...But Don't Let it Go Too Long

Fannie Mae will not approve your loan if you were recently more than 60 days late on your mortgage payment. Here's the scoop:

Loans with excessive prior mortgage delinquencies are not eligible for delivery to Fannie Mae. Excessive prior mortgage delinquency is defined as any mortgage tradeline that has one or more 60-, 90-,120-, or 150-day delinquency reported within the 12 months prior to the credit report date.

What About FHA?

FHA considers your mortgage or rent history THE most important part of your credit history, followed by utilities (which don't generally show up on a traditional credit report), installment debt, and then finally revolving debt like credit card accounts. So if you're going to miss a payment on something it's better to pay your mortgage on time and let Visa wait. If you're good on housing and car payments, you can probably pass an FHA credit check. Its guide states:

Generally, an individual with no late housing or installment debt payments should be considered as having an acceptable credit history, unless there is major derogatory credit on his or her revolving accounts.

So, if your late mortgage payment was an isolated occurrence, go ahead and apply for a refinance. If you can't refinance and are in trouble with your mortgage, talk to your current lender about a mortgage modification. Even if you have bad credit, lenders are often willing to help you stay in your home.

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