It’s never a good idea to miss a mortgage payment. I cannot therefore stress enough, making your mortgage payments on time is possibly the most important rule to maintaining a good credit report.
Does one late mortgage payment affect credit score? The answer is yes one late mortgage payment will affect your credit score. But the fact that you only missed one payment is much less negative on your credit file than if you had missed two or more payments. Also, the older the late mortgage payment becomes, the less impact it will have on your credit score.
What happens if you miss a mortgage payment?
It’s important to understand late mortgage payments and credit reporting. You need to know when is late, late?
When is late, late and what grace periods do mortgage lenders allow for late mortgage payments?
The grace period will vary from one mortgage lender to the next. Before you begin to panic if your mortgage payment is either already late or is about to be late, check with your mortgage lender to verify your exact grace period.
Never assume, always check.
Your mortgage payment may ‘bounce‘ at your bank for any number of reasons. One might be your employer has paid you late, so there’s insufficient funds in your bank account to cover the mortgage payment. No matter what the reason, if you don’t pay your mortgage payment when it’s due, you need to act quickly.
It is understood that the majority of mortgage lenders have a built-in 15-day grace period for late payments.
Mortgage payment grace period example
Let’s assume for example your mortgage is due to be collected on the 1st of the month. But for whatever reason this payment deadline is missed. Assuming your lender has a 15 day grace period, and so long as you pay within these 15 days, no late penalty will apply.
If however, you go past the grace period, your credit report is more likely to be affected. But the late payment still may not be reported on your credit score if you correct the error within the moth the payment is due.
But once a missed mortgage payment appears on your report, it can then take months, if not years to be removed.
This will then affect your ability to obtain further credit and in some instances to arrange insurance in the future.
Mortgage lender late Payment Reporting
If you go past the grace period set by your mortgage lender, you may still be okay. But you must check this with your lender and correct the problem as soon as you can.
It’s best to get on the phone to your mortgage lender as quickly as possible. Ideally within a month of the payment being missed. Or better still, within a few days of the missed deadline.
By seeking to rectify the error immediately, your mortgage lender may not mark it on your credit file at all. If you pay your mortgage a few days or even a few weeks late, you may escape it hitting your credit score altogether.
Normally most mortgage companies will be able to accommodate a late payment that falls outside their grace period. But usually the payment must be made good within the month it’s due.
Automatic late payment reporting system
This isn’t always the case, but most mortgage companies have an automatic late payment reporting system. Therefore, so long as you make the payment within the month, you may be lucky and not have it affect your credit score.
Having said this, as already explained above, check with your mortgage lender, as the policy on late payment reporting will vary from one lender to another.
But be warned, if you go past the grace period or the time limit set by your mortgage company to mark your payment as late, this will appear on your credit report. This has serious consequences to your ability to obtain further credit or to borrow in the future.
But where you’ve missed a bill, and once you’ve paid it, make sure you phone or email your mortgage lender to inform them that it has now been paid.
More than one late payment could be serious
Also be aware that just because your mortgage lender has a grace period of up to a month, this does not mean you can be late every month.
If you are continually late, this will flag as a problem and this could then affect your credit report.
Further consequences of missed mortgage payments
In addition to missed mortgage payments affecting your credit report, a more serious consequence of missed mortgage payments is repossession. If you continue to miss your monthly mortgage payments, you will go into arrears on your mortgage.
What is the difference between a late payment and arrears?
A late payment is where you’ve missed the payment deadline but you’ve corrected it within a month.
Whereas arrears are payments which start to add up, beyond that month. Arrears can have serious consequences.
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