The Impact of a Late Mortgage Payment

January 12, 2021
Last updated:
April 5, 2022
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Making a late mortgage payment can have a negative impact on your credit score. Thus, in order to prevent a drastic change in your credit score, it is important to monitor your credit report, make timely payments, and take advantage of payment reminder tools that are available.

This has been a difficult year for everyone. There are a lot of people who are worried that they might not be able to keep up with their mortgage payments. Small businesses have had to close their doors, and numerous individuals have been laid off from work.

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.

How Does A FICO Credit Score Work?

Someone’s credit score is a conglomeration of multiple factors, including payment history, the amount of money owed, the length of the credit history, and new credit. A late or missing mortgage payment is only going to impact one of these categories. Unfortunately, this also happens to be the largest factor, making up more than a third of the total credit score.

A Late Mortgage Payment

First, it is important for everyone to know that a late payment affects credit scores, but it is not going to impact someone’s credit score until it is late by more than 30 days. At the same time, people need to remember that the lender can still access a late fee. If someone has a high credit score with a long credit history, this late payment is not going to kill their score, but it will disqualify them for the best loan programs for the next 12-24 months. Someone with a poor credit score and a short credit history might feel the sting a little bit more.

Furthermore, people need to note that a payment that is late by 60 or 90 days is going to hurt someone much more than a payment that is late by just one month. Therefore, even if a payment is going to be late, people should still try to pay it as early as possible.

How A Late Payment Affects Credit Scores

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.

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Protect Your Credit History And Credit Score

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.

Check Your Credit Score And Report On A Regular Basis

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).

Utilize Timely Payment Tools

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.

Ask For One-Time Late Payment Forgiveness

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.

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Ready to Apply For a Home Loan in WA, OR, CO, or ID?

Are you curious about mortgages, or are you ready to apply for one to buy a home? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.

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