Does Paying the Mortgage After the Due Date Affect My Credit?

Does Paying the Mortgage After the Due Date Affect My Credit? thumbnail
Your home could be at risk if you fail to make your mortgage repayments.

A whole range of different companies report details about how you manage your financial affairs to the credit bureaus. These same businesses then pay the bureaus to see how well you manage your money when you apply for credit. Paying your mortgage late can result in your lender reporting your tardiness to the bureaus. This can damage your credit score and seriously affect your ability to borrow money in the future.

  1. Late Payment

    • Most lenders will report a late payment to the credit bureaus once you're 30 days past due. Although this will negatively impact your credit score, a single late payment shouldn't cause lasting damage to your file if it's an isolated incident. However, as reporting behavior varies among lenders, you should always make sure your payment is made prior to your due date to ensure your file is protected.

    Frequency

    • If you're regularly paying late and reaching the 30-day limit, or if your arrears start to extend into the 60- or 90-day cycles without a payment being made, the damage to your file will be considerably more acute. Payment history accounts for a large proportion of your credit score -- up to 35 percent -- so regularly paying your mortgage late can seriously impact your file. Once a payment is 90 days late, the damage to your file is comparable to bankruptcy.

    Consequences

    • Most lenders will immediately levy a late fee as soon as you pass your due date without making a payment. The damage to your credit file could mean that you'll be unable to secure credit in the future. Even a 30-day late mark on your file could mean the difference between qualifying for a cheap loan and being forced to settle for a more expensive deal, particularly when lending criteria is tight.

    Automated Clearing House

    • The best way to avoid paying late is to set up an automated clearing house payment from your bank account. Set the payment to go at least five days before your due date to make sure the money has enough time to reach your lender.

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References

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