Credit Score Effect
How Much Does a Loan Modification Hurt My Credit?
The study found that if you had excellent credit before the modification, the negative impact to your score would be minimal…typically about a 30 to 40 point drop. even if you had to defer your mortgage payments for 3 months!
And if your lender writes down your mortgage balance and chooses not to report the writedown as a chargeoff, About 10 to 30 points. I know…unbelievable. It’s because you have less total debt and your debt to income ratio won’t be as high.
Even if your lender recapitalizes your past due payments into the loan, you could see a minor increase in score too…according to the study.
Credit Score Impacts for Short Sales, Foreclosure, and Bankruptcies!
Short sale – typically about a 130 point drop.
Again, all of these assume you’re starting from excellent credit.
Foreclosure – about 140 point drop.
Bankruptcy – approximately 365 point drop!
Obviously, you should avoid bankruptcy if at all possible. The reason for the huge difference is because short sales, foreclosure, and modifications only affect one or two accounts. A bankruptcy, on the other hand, affects all of your credit accounts.