Sometimes you are doomed if you do and doomed if you don't.
That's the case now with mortgage payments you can't afford to pay. When you are missing payments, you are lowering your credit score, so your lenders get rough on you -- increasing interest on credit cards, for example, and making it harder to get your feet on the ground. On the other hand, your score also gets hammered if you get a loan modification.
A measure before Congress would provide some relief. See my Chicago Tribune column.
But with or without help on your credit score from this bill sponsored by Democrat Jackie Speier, of San Francisco, you will see that it pays to get a modification if you can. If you, instead, end up having to give up your home in foreclosure or a bankruptcy the consequences are much worse.
To see the impact of each possibility, consider this data from VantageScore, which provides credit scores to
some banks. It's a different group than FICO, the organization that is most often referred to in the media when talking about credit scores. FICO doesn't provide the detail of VantageScore. But by seeing the impact of mortgage changes on VantageScores you can imagine a similar impact -- on a percentage basis -- on a FICO score.
VantageScore. which comes from the Experion credit scoring firm, gives you a score ranging from 501 to 990. FICO scores run from 300 to 850.
I am going to show you different mortgage changes or consequences using VantageScores -- 862, which in school would be equivalent to about a B+, and 625, which would be about a D.
So here's what certain actions would do to the scores.
Action: Loan modification/borrower responsible for new loan
Person with 862. With no prior defaults -- or missed payments -- on any loan or credit card, the person would lose 14 to 20 points on their credit score