If your mortgage payment is only a few days late, the main issue is usually making sure it is received before your lender’s grace period ends. Once you are past the grace period, you may be charged a late fee. If the payment becomes more than 30 days late, it can be reported as delinquent and may start affecting your credit, with 60- and 90-day delinquencies generally carrying more serious consequences.
Many people worry that they might not be able to keep up with their mortgage payments. Job loss, reduced income, and other financial setbacks can make it harder to stay current.
Homeowners need to understand that banks do not want people to foreclose on their homes either. Therefore, they are often willing to work out an alternate payment plan with homeowners who are struggling due to dire financial situations. Those who are late on a mortgage payment might be wondering how this will impact their credit score. The answer is that it depends.
In general, grace periods on mortgages vary from lender to lender. That said, most grace periods are approximately 15 days from your due date. Thus, if your payment is due on the first day of each month, then you basically have until the 16th of the month to make your payment. If for some reason, you end up paying after the grace period ends, then you may very well be hit with a late fee of 3% to 6% of your monthly payment.
When a mortgage payment is late, the most important borrower question is not the full credit-scoring formula. It is what happens next. In practice, there are a few separate issues to watch: your lender’s grace period, whether a late fee applies, whether the payment becomes 30 days past due and is reported as delinquent, and how serious the delinquency becomes if it reaches 60 or 90 days late.
That severity can matter later when you apply for financing again. Mortgage lenders review credit history for previous mortgage delinquencies, including how late the payment was and how recent it was. When there are 30-, 60-, or 90-day late payments, the lender may need to determine whether they were isolated incidents or part of a broader payment problem.
First, it is important for everyone to know that a late payment does not usually affect credit scores right away just because it is a few days late. However, the lender can still charge a late fee once the grace period ends. If the payment becomes more than 30 days late, that is when it may begin affecting your credit.
The longer the delinquency lasts, the more serious the consequences may become. A 60- or 90-day late mortgage payment is generally viewed more severely than a single 30-day late payment. That can matter not only for your credit profile, but also for future mortgage eligibility, because lenders often look at the severity, recency, and overall pattern of prior mortgage delinquency.
Even so, outcomes can vary by lender policy and by the rest of your credit profile. That is why, even if a payment will be late, it is still important to make it as soon as possible and to communicate with your servicer early.
As you may be aware, your payment history is the biggest factor in determining your credit score (payment history accounts for around 35 percent of your score). Consequently, it is crucial to pay your bills in a timely fashion.
Often, a couple of factors determine just how much a late payment will affect your credit score, such as how late the payment was and how significant/severe the late payment was. Here, missing a mortgage payment or paying late is considered to be substantial. Note, according to FICO’s credit damage data, one recent late payment can cause over a 100 point drop on your FICO score, depending on your credit history.
Now that you are aware of just how much your payment history affects your credit score, it is time to take action to ensure late payments are not negatively impacting your score. Here are three tips for doing so.
You should absolutely make it a habit to check your credit reports frequently or at least annually (for free) to ensure late payments are not being reported inaccurately or there are no errors on your report. In the event that you do see inaccurate information on your reports, the next step is to challenge the findings of your report and ask for verification from the credit bureaus (Experian, Equifax, and TransUnion).
You can avoid late payments by utilizing timely payment resources. For instance, you can sign up for auto-payments via a credit or debit card or checking account – if your lender offers this option. If auto payments are available, then you can set and forget your payments. However, you do have less flexibility when it comes to making payments each month. Moreover, not having enough funds available might also mean you will incur overdraft fees along with return check/funds fees.
If auto payments are not your thing or you have a habit of overdrawing your account, then you may want to consider using your cellphone apps, phone alarms, or bill payment reminder notifications to ensure that you make your mortgage payments on time.
You can also consider making smaller, more frequent payments. This is especially helpful if you are struggling to save or are having difficulties covering your larger bills each month. Ultimately, by paying a portion of what you owe every week, you can simplify your budget. That said, if you do choose to go this route, then make sure you will not be charged convenience fees for making multiple payments each month.
Lastly, if you know you will likely make a late payment, then talk to your lender. Most lenders, banks, and creditors understand that life happens. Similarly, if you do find yourself making a one-off late payment unexpectedly, then contact someone who can assist you with the possible repercussions before it affects your credit score.
At the end of the day, you should try to do everything in your power to protect your credit score. So, if you are worried about making a late mortgage payment, then seriously speak with your lender and see what your options are.
Sammamish Mortgage can help. We serve clients across Washington, Idaho, Colorado, Oregon, and California. Since 1992, we’ve been providing several mortgage programs and products with flexible qualification criteria to borrowers across the Pacific Northwest. Visit our website to get an instant rate quote or to use our online mortgage calculator. Or, reach out to us if you are ready to get pre-approved for a mortgage.
A mortgage payment that is only a few days late does not usually affect your credit right away. The key issue is whether the payment becomes more than 30 days past due, because that is when it may be reported as delinquent and start affecting your credit.
Usually, no. If your payment is received within your lender’s grace period, a late fee generally does not apply. Once the grace period ends, the lender may charge a late fee.
The most common penalty is a late fee after the grace period expires. The article notes that many lenders have grace periods of about 15 days and may charge a late fee of roughly 3% to 6% of the monthly payment if the payment is made after that period.
A late mortgage payment may be reported once it becomes more than 30 days late. Payments that are 60 or 90 days late are generally considered more serious delinquencies.
A payment that is 1 day late is usually less serious than a payment that becomes 30 days past due. The immediate concern is whether the payment is still within the grace period. If it is, the main goal is to make sure the lender receives it before that period ends.
If you miss your mortgage payment by 2 days, the result often depends on your lender’s grace period. In many cases, a payment that is only 2 days late will not affect your credit immediately, but you should still make it as soon as possible and confirm how your lender handles late payments.
A payment that is 2 weeks late may still fall within some lenders’ grace periods, but that varies by lender. If the grace period has ended, you may owe a late fee. Credit damage is more likely to become a concern if the payment goes beyond 30 days late.
If your mortgage payment becomes more than 30 days late, it may be reported as delinquent and begin affecting your credit. That can also matter later because future mortgage lenders may review how recent and how severe the delinquency was.
A 60-day late mortgage payment is generally viewed more severely than a single 30-day late payment. The longer the delinquency lasts, the more serious the consequences may become for your credit profile and future mortgage eligibility.
You can ask your lender or servicer whether one-time late payment forgiveness or other relief may be available. Many lenders are willing to discuss alternate payment arrangements or possible flexibility, especially if you contact them early and explain your hardship.
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