Does a Loan Modification Affect Your Credit Score?

By: Timothy McFarlin | Published: September 23rd, 2010 | Category: Loan Modification

As a loan modification attorney, many homeowners ask me, “Does a loan modification affect your credit score or hurt your credit?”  The answer generally is that the loan modification itself is not terribly detrimental, however the necessary late payments leading up to the loan modification can affect your credit score. So, Does a loan modification affect your credit score or hurt your credit? Generally yes.

Does Loan Modification Affect Your Credit Score?

Applying for a loan modification by itself does not impact a homeowners credit score as it is not an event or issue that is reported to the credit bureaus. Generally the credit bureaus are only interested in missed payments, late payments, defaults, etc. A homeowner simply contacting their own lender to request a workout or a modification of their loan terms will not be reported by the lender to the bureaus, and even if it were, there is no section of a credit report for this type of activity. However, that’s not the end of the “Does loan modification affect your credit score” story.

Does Loan Modification Hurt Your Credit Score?

Naturally, the next question to ask is, does loan modification hurt my credit? As described above, a loan modification request by itself isn’t damaging to your credit score, the problem comes because lenders generally will not consider you for a loan modification unless your in default or behind on payments. This is where loan modification can hurt your credit. To get to the point of being considered for a loan modification requires a default on the loan typically, this default and late payments are reported to the credit bureaus and will affect your credit score. So, in order to be considered for a loan modification, it is typically necessary to damage your credit score by not making mortgage payments.

Loan Modification Credit Impact

As you can see, a typical loan modification does have a negative impact on your credit score. It’s not the loan modification itself, but the necessary late payments that hurt your credit score. However, if you go through the loan modification process, and successfully begin making payments to the lender again, the account should reflect a “current” status which can allow for your credit score to improve over time.

Federal Loan Modification Attorneys

McFarlin LLP Federal loan modification attorneys handle all aspects of loan modification throughout California, and available in person for our local borrowers in Newport Beach, Huntington Beach, Laguna Beach, Irvine, Tustin, Costa Mesa, Fullerton, Yorba Linda and throughout Orange County, Los Angles, Riverside, San Bernardino and San Diego County. Our attorneys are available to provide you with honest reliable advice at our Irvine or Los Angeles offices or over the phone if you are out of town. With a matter as important as loan modification and foreclosure, it is a very good idea to consider hiring a qualified Federal loan modification attorney to represent you and protect your interests. Call us today at (888) 728-0044.

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