What Happens to Your Credit Score if You Miss a Mortgage Payment?

The short answer is it depends -- but the impact can be more severe than you think.

It is common knowledge that missing a payment on your mortgage is bad for your credit. But just how bad is it? Are we talking about just dropping a couple of points on your credit score? Or could missing a single mortgage payment have a devastating impact?

There's no easy answer to the question of how a missed mortgage payment will impact your credit score. But here's what you need to know.

How do late payments affect your credit score?

First, here's the short version of how your FICO credit score works. There are five categories of information that make up your score:

• Payment history (35%)
• Amounts owed (30%)
• Length of credit history (15%)
• Credit mix (10%)
• New credit (10%)

Missing a mortgage payment affects only one of these categories, but it just so happens to be the most important one. Your payment history is the single largest factor that makes up your credit score, contributing 35% of the total.

The actual FICO formula is a closely guarded secret, but here are a few things we do know:

• There are different degrees of late payments. A late payment typically doesn't affect your credit score until it's 30 days past due (although your lender can certainly still charge you a late fee). A 30-day late payment will have a lesser impact than a 60-day or 90-day late payment, all other factors being equal.
• Late payments matter less as they get further into the past. In other words, if you were 30 days late with your mortgage payment just a few months ago, it will have a greater impact than a single late payment from five years ago.
• The better your score is before you miss a payment, the more your credit score will be affected. If you have a FICO^® Score of 800 and miss a mortgage payment, it can be far more damaging than if you have a score of 650.

How will one missed mortgage payment affect your credit score?

With all of that in mind, FICO did a simulation that compared the impact of hypothetical credit actions on two people -- one with an excellent credit score of 793 and one with a fair-to-poor credit score of 607.

First, the simulation looked at how a single 30-day late loan payment would affect each person's score. The consumer with the 607 would see their FICO^® Score drop anywhere from 17 to 37 points, while the consumer with great credit would experience a far more dramatic plunge of 63 to 83 points.

In the case of a 90-day late payment, the range for the drops would have been 27 to 47 points and 113 to 133 points, respectively. So the person with a credit score of 793 could see it fall as low as 660 and the person with a score of 607 may hit 560. In short, missing a single payment would have a devastating impact on a borrower with an excellent credit score, but wouldn't have a big effect on a borrower who already had sub-par credit.

You might be wondering why there's a range for each potential drop. This is because every borrower is different, and there are many potential variables that determine the impact of any single credit action.

Do this before you skip a mortgage payment

As a final thought, consider that the impacts discussed in the last section assume that you didn't work out some sort of arrangement with your lender ahead of time. If your lender is willing to grant you a temporary forbearance (a suspension of payments), missing a mortgage payment might not have any adverse impact on your credit score. In fact, most mortgage borrowers are legally entitled to a mortgage forbearance for as long as 12 months during the COVID-19 pandemic thanks to the CARES Act legislation.

So, as soon as you think you might have trouble paying your mortgage, the smartest thing you can do is call your lender and try to work out an amicable solution. If you are struggling because of the coronavirus, you might be surprised how flexible your lender can be (especially if you have an otherwise solid payment history). And finding a solution before you miss a payment might just save your credit.