How to wreck your credit score

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How to Wreck Your Credit Score
by RMNelson
Tuesday, May 24, 2011
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Don't underestimate the harm that even one missed mortgage payment can do to your credit score --especially if you had good credit to begin with.

The severe consequences underscore that you shouldn't shrug off even an accidentally missed payment. Instead, you should pay it and call the lenderright away, begging for forgiveness before it mars your credit record.

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In an unusually specific commentary to lenders,Fair Isaac (NYSE: FICO - News), the creator of the FICO score, recently spelled out the severe consequences to the credit scores of borrowers who are 30 days late on their mortgages -- as well as thelong-term impact of failing to repay the whole mortgage.

It isn't a pretty picture.

Being 30 days late on a house payment -- even if it is an accident -- can knock 100 points off a pristine 780credit score, moving you from qualifying for the very best interest rates to the edge of subprime territory.

The actual numerical drop is less severe if your starting credit score is 720 or 680, butthe impact is greater, since your new score is likely to sink to a level where new credit is hard to get and very expensive.

[More from Why the Latest Credit-Score Fixes Fall Short]

TheFICO score ranges from a low of 300 to 850, with scores of about 750 or higher generally qualifying for the best loan terms.

The details provide a warning for anyone whose home is way underwaterand is tempted to simply walk away, or considering a "short sale." That is when the sale price is less than the amount you owe and the borrower doesn't make up the difference. More than 350,000 homes...
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