| With all the benefits of loan modification, homeowners | | | | can also hurt your credit worthiness. |
| might not be aware of one of it's major pitfalls. When | | | | Most borrowers will still feel that the benefits of |
| a homeowner modifies an existing loan, there is a | | | | modification outweigh this negative aspect and that in |
| negative effect on their credit rating. Credit scores | | | | time, they can build their score up again. The problem is |
| range anywhere from 300 to 850. This numeric rating | | | | that most consumers are not informed of this |
| affects a consumer's ability to obtain credit, mortgages | | | | possibility prior to modifying. For those who are |
| and even insurance products. In today's market, to get | | | | self-employed and rely on personal or business credit |
| the best rates, one needs a credit score of 740 or | | | | lines, it can become a serious problem. If they rely on |
| higher. Any account or mortgage which has been | | | | credit lines to keep their business afloat, limiting their |
| renegotiated will cause your credit score to fall | | | | accessibility could ruin their income. |
| significantly, even if you haven't missed a payment. | | | | Credit bureaus have certain guidelines to follow when |
| Once the modification is reported to the credit bureau, | | | | they are advised of a modification. These guidelines |
| your score nosedives. In the past, people who entered | | | | states that homeowners in the probationary period of |
| into any type of reduced payment plan represented a | | | | modification should be reported as being current with a |
| greater credit risk. If a borrower has a high score, the | | | | stipulation that they are on a partial payment plan. This |
| impact of modification will be greater than those with | | | | will eliminate the word "delinquent" from their file. Once |
| lower credit scores. | | | | a homeowners is a month past due, then they will be |
| A lower credit score can have many ramifications. | | | | listed as delinquent until the account is brought |
| Personal credit lines and credit card companies can | | | | up-to-date again. In the meantime, credit companies |
| reduce your borrowing limits. They can even freeze | | | | are scrambling to classify modified mortgages under a |
| your accounts so that you are unable to use them. | | | | new category to minimize any negative ratings on |
| While helping you on the mortgage end, modification | | | | credit. |