If you are one of the people who have been faithfully making mortgage payments for years, you might think that missing one payment won't have a big impact on your FICO score. But the truth is, even one missed payment can create damage to your FICO score. Lenders have the access to report your missed payment as immediately as they desire. Meaning, if you miss your payment by a few days, your lender might go ahead and list it as unpaid.
Here's what you need to know about your FICO score:
The Single Most Crucial Factor In Your Credit Score Is Your Payment History
FICO scores comprise of multiple criteria, but the largest part of it is based on your payment history. 35% of this score is determined by how often you pay on time and in full. Although it was said that two late payments won't impact your credit score, some points will be scraped off from your score that could make a difference between a low risk and high risk interest rate.
People With Higher Credit Score Can Lose More Points WhenMissing Payments
According to a 2011 FICO study, it turns out that one consumer with a 780 credit score can lose 100 points if he/she is 30 days late on her payment. And it would take that person 3 years to regain the lost credit. A person with a 680 credit score on the other hand, if paying 30 days late, can only lose about 70 points from her credit score, and recovery time can be just as short as 9 months. So contrary to popular belief, people with higher credit scores should not feel comfortable in delaying payments.
The Varying Degrees Of Late Payments
The common misconception is that 'Late is late...". We tend to think that 90 days late is no different from 30 days late. But the thing is that, the more delayed your payment is, the bigger the impact it will bring your your FICO score. If your current credit score is 720, it can fall to 640 after being late on your mortgage for 30 days, and 620 if you're late for 90 days. This is why once you miss a mortgage, you should contact your lender immediately to arrange payments and hope that your late payment hasn't been reported yet.
