If you see a mortgage late on your credit report, don’t panic! Credit repair with a mortgage past due is a difficult task, but it’s not impossible. Although not a guarantee, it is possible to have mortgage lates removed from your credit report by working with your lender or servicer. When investing in real estate, whether with hard money for fix and flips or DSCR loans, mortgage lates and a good credit score are crucial for you to get the lowest rates and best terms!
As you would with any information in your report, verify the accuracy of the reported late payment and ensure it aligns with your records. Mortgage lates have a very, very significant impact on your credit score. It’s worth noting that a mortgage payment isn’t considered “late” until it’s more than 30 days late. If not addressed, late payments can stay on your credit score for up to 7 years. Although there’s not an exact measurable number by which a single mortgage late will impact your score. A late payment tends to have a greater negative impact on those with higher scores.
Addressing your Mortgage Past Due
Mortgage lates can be broken down into two general categories. Either the lender/servicer is at fault, or the borrower is at fault. If your mortgage late falls into the first category, your path to an amicable resolution is a bit easier. Get ahold of the lender or servicer, explain the situation and why you believe the late payment is inaccurate. For the highest chance of success, you should get an admission of fault from them on company letterhead. The lender or servicer will then reach out to the credit bureaus informing them of this mistake.
Goodwill Letters
If you happen to be at fault for your mortgage late, for whatever reason, it is going to be a lot more difficult to get it removed from your report, although not impossible. Assuming that the rest of your credit report is stellar (no other accounts late, solid history of timely payments, etc.), you can send your lender a goodwill letter asking for forgiveness. According to Credit Karma, a goodwill letter is requesting that the creditor (in this case, the lender) “remove something negative but legitimate as an act of kindness or understanding.” There are a myriad of reasons why you may have been late, your goodwill letter should outline your situation in an honest manner.
This approach is not a traditional dispute, nor is it recognized as a viable tactic by the CFPB or FTC. There is no set process that will be followed like there would be with a traditional dispute. Neither is there a guarantee that it will work (or that you’ll even get a response). Unfortunately, this is your only option if you are at fault for your mortgage late. If the goodwill letter doesn’t end up working out, all you can do is make sure you are not late again and stay on top of all of the other accounts in your credit reports.
How Long will it take to Repair Credit for a Mortgage?
After executing your credit repair strategy and getting back on track, you now feel ready to seek mortgage approval once again. So how long will it take your report and, more importantly, your score to reflect the hard work put in to correct your credit history? This varies widely based on individual circumstances and the specific factors impacting your score. Given the varied nature of individual credit scores, there is no one-size-fits-all answer as to when you will begin to see improvements. With that being said, there are some general guidelines on when you can expect this to occur depending on severity:
Credit Reporting Errors
Consumer reporting agencies investigate disputes within 30 days of receiving them. After which, they have 5 business days to notify you of the results. If your dispute is filed after receiving your free annual credit report, the investigation period is increased to 45 days. Additionally, any supplemental information submitted during the initial 30-day investigation period may extend it up to an additional 15 days. Generally speaking, these errors are resolved in 35-45 days.
Minor Issues
A few late payments. Assuming the appropriate accounts/balances are promptly addressed, improvements can be seen within a few months.
Moderate Issues
Multiple late payments and/or higher levels of debt. Credit score aside, addressing issues like this will naturally take more time and require a more concentrated effort on the individual’s behalf. Moderate issues may take six months to a year or more to see noticeable improvements.
Serious Issues
Bankruptcies or foreclosures. The credit repair process will likely take several years. A Chapter 7 bankruptcy will stay on your credit report for 10 years (7 years for Chapter 13). A Foreclosure will stay on your report for 7 years (CFPB). While, this info may seem discouraging, it’s good to note that recent negative information has a greater effect on your score than older information.
It’s essential to consistently practice good financial habits, including making on-time payments, reducing outstanding debts, and managing credit responsibly. Additionally, regularly monitoring your credit report for accuracy and addressing any discrepancies promptly can expedite the credit repair process.
Credit Repair for Mortgage Approval: Rapid Rescore
If you have put in the work to improve your credit score and are close to a specific credit score needed for mortgage approval, you can take advantage of a process called rapid rescoring. Assuming you have identified and resolved any minor, problematic accounts/balances, rapid rescoring could be your way to get mortgage approval. It’s important to note that this process is not something available to individual borrowers. Mortgage lenders must initiate this process. Lenders will work with one (or more) of the three credit reporting bureaus to get an updated credit score. If you’ve taken the appropriate steps, you may see an increase in your credit score that pushes you past the minimum requirement to get mortgage approval. With that being said, it is impossible to tell how much your score will increase.
Conclusion
Having a late payment isn’t the end of the world. After all, it will eventually be lifted from your credit report after seven years. Although the interest rate and terms you may be offered will be more strict, lenders such as Easy Street Capital are still able lend to borrowers with mortgage lates.
About the Author
- Top 5 Markets for Wyoming Real Estate Investors in 2024 - June 6, 2024
- Top 5 Markets for Wisconsin Real Estate Investors in 2024 - June 5, 2024
- Top 5 Markets for West Virginia Real Estate Investors in 2024 - June 4, 2024
Stay in the Loop
Subscribe to our newsletter