If In A Loan Modification Program, Is Your Credit Score Affected?

The loan modification program was created for people that are struggling to keep their homes out of foreclosure. One of the worst parts about falling behind on your payments is the negative effects it has on your credit. Not only do you have to face the terrifying threat of foreclosure, your credit score will begin to drop. A bad credit score can keep you from getting anything from a cell phone to an apartment if the worst happened and you did lose your home. With the introduction of the loan mod program there is now a way to save your home, and begin to restore your credit in the process.

A modification loan will look at your income and restructure your loan to a payment that is 31% of your current income. All of the delinquent mortgage payments that are bringing your credit score down will be absorbed in the new loan structure and all of the late fees will be removed. When the modification process is complete, your credit report will read that your mortgage is current. This will not only remove a negative item from your credit report, but also creates a good credit source when your mortgage is not showing that you are behind. This means that if you are approved for a loan modification it will raise your credit score.

How much and how fast your credit score will go up depends on what else is on your credit report. Indirectly a modification of your mortgage can help you with your credit simply by lowering your payment to a level that you should be able to have a little extra money to be able to pay the bills that have been falling behind while you have been struggling to keep your home. The important thing to know is that when you are facing foreclosure a loan modification can not only save your home, but help you begin to restore your credit.