What determines if your credit score is affected by a loan modification? The first consideration would be when you were paying your bills before, were you always on time or sometimes late? Another factor is the amount of recoverable principal that is included in your loan modification. Simply getting a loan modification does not lower your credit rating, but missing payments or violating the terms of your original agreement does.
If you get a loan modification you might get part of your principal forgiven. In this case, this will be referred to as a reduced payment and will negatively affect your credit rating. Usually the report shows that you were late or missed payments before the loan modification took place. If this applies to your circumstance, your credit rating will be improved after the loan is renegotiated and you are recorded as paying in full and up to date.
Since the program of loan modification is very new for everyone, there is no precedent to say how credit bureaus record loan modifications. It is a good idea to discuss this with your lender and come to an agreement about how it will appear on your credit report. Make sure you bank will tell the credit bureau about your loan modification agreement. You bank may not do this unless you ask.
The first thing to do to re-establish a good credit rating should take place immediately after loan modification procedures are in place. A loan modification allows you to avoid foreclosure and rewrite the terms of your mortgage. So take control of the situation and ask questions if you need to.
If you are still not sure how a loan modification may influence your credit score, get a copy of the Complete Loan Modification Guide. This guide has all the forms needed to begin the modification process and instructions for filling them in. Read the Complete Loan Modification Guide before you talk to you bank. Be informed before you visit them.
Loan modification is the easiest way to avoid foreclosure and stay in your home. Before you being, learn how this process will affect your credit rating.