How a Late Mortgage Payment Affects Your Credit Score

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Have you ever wondered how a late mortgage payment would affect your credit score? How about a foreclosure or bankruptcy? Well, the folks over at FICO did some research into this question and the results may surprise you.

The FICO research looked at three hypothetical consumers with starting credit scores of 680, 720 and 780. (If you don’t know your credit score, check out several ways to get your credit score for free.) FICO assumed that each credit file was representative of similar credit files with the same credit scores (e.g., credit utilization, age of credit file, history of delinquencies and so on). And then it looked at the affect on the credit score following several events ranging from being 30 days late on a mortgage payment to bankruptcy.

What was most surprising to me is that the higher the starting credit score, the more it fell. I guess the bigger they are, the harder they fall. Here are the results of FICO’s research:

 
Consumer A
Consumer B
Consumer C
Starting FICO Score~680~720~780
FICO Score after these events:
30 days late on mortgage600-620630-650670-690
90 days late on mortgage600-620610-630650-670
Short sale/deed-in-lieu/settlement
(no deficiency balance)
610-630605-625655-675
Short sale (with deficiency balance)575-595570-590620-640
Foreclosure575-595570-590620-640
Bankruptcy530-550525-545540-560

The FICO research also looked at how long it would take to recover your credit score after one of these mortgage mishaps. Interestingly, the higher your starting FICO score, the longer it will take you to recover. Here are the results of the research:

 
Consumer A
Consumer B
Consumer C
Starting FICO Score~680~720~780
Time it takes to recover
30 days late on mortgage~9 months~2.5 years~3 years
90 days late on mortgage~9 months~3 years~7 years
Short sale/deed-in-lieu/settlement
(no deficiency balance)
~3 years~7 years~7 years
Short sale (with deficiency balance)~3 years~7 years~7 years
Foreclosure~3 years~7 years~7 years
Bankruptcy~5 years~7 to 10 years~7 to 10 years

There are several results from this research that I found particularly interesting:

  1. The time to fully recover your FICO score was much longer than I would have guessed. Seven years to recover from being 90 days late on your mortgage payment, for example, seems excessive to me.
  2. The time to recover your score varies significantly based on your starting FICO Score. While this is not totally surprising, the differences are. For example, with a score of 680 it takes just 9 months to recover from being 90 days late on a mortgage payment, but up to 7 years if your starting credit score was 780.
  3. If you start with a good credit score, it takes just as long to recover from being 90 days late as it does a foreclosure.

FICO has released similar research in the past. Last summer, for example, FICO described how several common financial mistakes can hurt your credit score.

Published or Updated: March 5, 2013
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

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