If you're experiencing mortgage credit problems, have missed home loan payments, and are perhaps delinquent on other credit accounts as well, it may be tempting to give up. The stress can be debilitating, the balances pile up, and you think you will be in bad-credit Hell forever. A recent study by VantageScore shows that's not necessarily the case.

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It's true that missing a mortgage payment does a lot more damage to your credit score than being late on a credit card account. And getting into default can drop your score by as much as another 120 points. But a talk with your lender, preferably as soon as you get into trouble, can help you stop the bleeding. The study found that borrowers whose lenders were willing to capitalize their late payments, that is, bring the mortgage current and roll the arrearages into the loan, improved their credit scores. The mortgage was no longer delinquent and there was no foreclosure.

Others who went into trial mortgage modifications had mixed results. If they were current on their loans at the start of the trial period, the lenders did not report them as late. And if a permanent mortgage modification (which caused the score to initially drop 100+ points to about 600) made it possible for them to begin paying all of their obligations on time, their scores often rebounded to 700 in nine months.

Borrowers who were offered principal reductions in their mortgage modifications also got mixed results, depending on how the loan was reported. If it was left alone, with the same start date and initial balance but the current balance reduced, the credit score tended to increase, because the homeowner still had an aged account with a lower balance. However, if the account was treated like a mortgage refinance with a new start date and balance, the score went down. This effect was even more pronounced if the mortgage was reported as settled for less than the amount due.

Those who let their homes go into foreclosure, negotiated a short sale, or returned the property with a deed-in-lieu of foreclosure all suffered the same amount of credit score damage. And finally, those who filed bankruptcy took the biggest hit of all. However, borrowers with perfect credit saw their scores drop as much as 365 points, while borrowers with credit problems already (score 625) only took a hit of 110 points. The moral of the study? Address your credit problems early, then do what you can to recover. It needn't take that long.