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Information on Mortgage Modification and Credit Impact

Mark Cappel
UpdatedMar 5, 2009

How will a mortgage modification impact my credit?

Hello. I have excellent credit and am six years into a 30 year fixed mortgage. I have never missed nor been late on my payments. I was recently laid off and decided to explore a workable solutions option that my mortgage company was offering. They are offering me an option of reducing my payments by 20% given my payment history and my current financial situation. I asked if this would affect me adversely from my credit rating standpoint. And they said it would only show that I was in a payment plan with my mortgage company. My question: Will this have any adverse affect on my credit score? I ask because I have worked very hard at keeping my credit at a top level and wouldn't want any help that would hurt me.

Thanks for your question. The potential credit impact, if any, depends on whether the reduction is temporary or permanent, is made by reducing interest or principle, and other factors. That said, if modifying enables you to continue your perfect payment record (and your house!), then mortgage modification will be a much better option for maintaining your credit compared to the credit damage caused by missed payments and foreclosure. Just be sure to read and understand your new terms so you're not surprised by hidden fees, penalties, balloon payments, or other things down the road. After all, you don't want to be just "jumping out of the frying pan and into the fire."

I also encourage you to check out the options that will be available come March 4th through the government's new "Homeowner Affordability and Stability Plan." The offer you have been given may be the best one possible for your situation, but it won't hurt to read about the major changes being introduced March 4th by this plan. Generally speaking, it will increase the options for many distressed homeowners. I can't say whether any of them will beat what your mortgage provider has offered, but at the very least, it should help you better understand some of the major changes happening regarding mortgage restructuring.

Free official summaries, fact sheets, and other publications and resources regarding the "Homeowner Affordability and Stability Plan" are available for free viewing and downloading at:

For Q&A regarding many commonly asked questions regarding the "Homeowner Affordability and Stability Plan", please see here:

I wish you continued success with your perfect payment history and hope that the information I have provided helps you Find. Learn. Save.




BBill, May, 2009
Ideally, you should not miss any payments at all, it is a myth that you have to be behind on your mortgage in order to get help with a modification, not true. Try and get cought up with your payments, your lender knows that you are having a tough time, and one missed payment should not hurt. In any case, keep in constant touch with your lender.
ddaniel, May, 2009
I just miss last month morgage payment for modification , i want to get help from lender without getting hurt my credit? How should should i do? The proceses take a time. Shouldn't i miss no payment at all?