Learn How Loan Modification Affects Credit Score

Many people are familiar with the term “loan modification.” It simply means making some changes to one’s mortgage loan so it’s easier to afford.


Pittsfield, MA -- (SBWIRE) -- 02/21/2013 -- knows the answers to “Will a loan modification affect my credit?”And would like to share that information, which includes:

- Loan Origination Point
- Whether Payments are Reported
- Starting Credit Score
- Use of Accessible Credit

Where the Loan Modification Originates

The question “Does a loan modification affect your credit?” is a good one. The short answer is it depends. Because there are federal programs specifically designed for struggling homeowners (HAMP, HUD) one’s credit rating improves because one takes this step to save not just his home, but his credit ability. When the loan modification is done through a bank, it will likely improve a person’s score, but not quite as much.

Payments Must be Reported

When someone is looking for loan modification, he must be sure that the institution he obtains it from reports payments to the major credit reporting bureaus, each of which tracks a consumer’s credit rating over time. One answer to “Will a loan modification affect my credit?” is yes. If the agency that issued the modification reports to these bureaus, every payment received shows up on one’s credit reports, indicating improvement.

One’s Beginning Credit Score

A person’s credit score prior to requesting loan modification has a great deal to do with the answer to “Does a loan modification affect your credit?” When the reason that someone needs the modification is two-fold – to keep his home and to pay off debt – getting the help he needs is based upon his starting credit score. When someone’s score is less than 620, it may be a bit more difficult to get the financing he needs because he’s already in credit trouble and appears to be an unsafe risk. If, however, the score is over 660, he should have no problem.

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Utilization of Available Credit

“Will a loan modification affect my credit?” has another response, and it is probably, but in a positive manner. When a loan modification is done with no “charge off” amount ( a dollar amount that is deemed UN collect able and is written off), the process could help improve one’s credit score so long as the modified loan is not considered new. This result is due to the fact that partial forgiveness of the principal reduces the overall amount of credit a person uses, making that person more creditworthy.

About Credit-yogi is a reputable consumer resource website located in Pittsfield, Massachusetts that provides its service at no cost. Aided by the combined intelligence of over 260,000 financial and legal professionals, people looking for answers can find them here. For a complimentary consultation, dial 866-964-9644.