Is it better to miss fewer payments? (credit score)

[spj3210]

Hope I worded that subject right. We haven't missed any payments yet as we've been on the fence still about how to proceed. Well we started looking at rental homes today, found one that is great and extremely well-priced, so much better than the others we've seen in our price range, it made us want to up and move right then. BUT we know part of the possible up-side to foreclosing is getting to miss some payments and bank that $.

It also got me thinking about a post I saw on here about how the missed payments piling up can be worse than the actual "foreclosure" on your credit report? Can anyone explain what the difference will be on your credit report and if there's some way to have it be less bad by not missing as many payments? Though I guess that's not necessarily an option since it's the missed payments that force you into foreclosure?

Will they do a deed-in-lieu before you've missed any payments?

[tryingtostay]

Honestly, I think different people are getting different drops in their credit scores so it's going to be hard to answer your question.

There are a few factors...
-does your mortgage company report lates immediately?
-do you have other credit lines you are regularly making payments on?
-if the other credit lines notice late payments from the mortgage, they may cut your credit line. this will lower your FICO. but not all companies are doing this; American Express seems to be doing this within the 2nd or 3rd month of missed payments though

I don't know how to make it "less bad" Honestly I really worried about this, too. Our excellent credit dropped quickly -- within 60 days. Some people are trying to find rental units before their credit is destroyed, others are discovering rental companies understand about the foreclosure mess.

If you are finding one before your credit is ruined, you may want to warn them what is coming. If you find one afterwards, you can save your mortgage payment that you are not making for rental deposits. And be prepared to pay more for a deposit than if you had excellent credit.

I found I had saved enough from not making payments to open a Roth IRA today...YAY! I'll forget the house, but I'm planning for the future and moving on with my life.

[spj3210]

Thanks for your reply, tryingtostay, and congrats on starting up the IRA!

So I've been looking into this issue more and still I'm so confused, in fact one site I read said that a short sale with no missed payments, or a DIL with no missed payments, would both show the mortgage as "settled" though I don't know what that means, assuming settled as in short settlement? B/c either way we have to settle our 20 percent loan which from the little advice I have been able to find re: how that's going to look on our credit report, it would look something like a short sale would. I feel like my goal right now w/the first lender is to do a DIL and not miss any payments, does that make any sense? I think the major issue there is getting the lender to agree to a DIL with no missed payments yet..

And.. I was reading today too that even with a short sale, expect to wait 5-7 years before you are able to buy another house. Where on earth can I find the accurate, current information on this stuff?

[puffer]

For what its worth,i just lost a second home and the bank reported 30 days late 60 days late then reported a repossesion/foreclosure. It took me for about 70 points total. As soon as they reported the foreclosure ,my score actually went back up 10 points.

[J2911]

After being just 30 days late on our mortgage, My score went form 794 to 697- that's 97 points!!! after never being late on ANY payments EVER!
My only other open item is a Chase account with a $5000 balance.
I knew it was going to go down, put really didn't expect a drop after just 30 days. We printed out our credit reports before missing our first payment in January...just to have a hard copy (if needed) to show that before this mess we had great credit. My husband's score dropped from 804 to 730.
Anyway, in the same 30 days, our property value dropped $59K so I do not regret our decision to walk.

[spj3210]

So from everything I'm reading, it's the missed payments that cause the major drop in credit score, and the foreclosure or short sale or deed-in-lieu doesn't have as much of an impact on number score but will obviously make it very difficult to get another loan one day, b/c of the fact that you had a DIL or foreclosure or etc...

So if we're able to keep making our payments while we negotiate the settlement on our second loan and the DIL or short sale on our first loan, then our credit wouldn't be hit as hard? How do I convince the first loan to do anything without any missed payments?

[ORNV3]

My credit score 1/1/09 was 768. I'm now 2 months behind on my second and 1 month behind on my first. My credit score today is 678. Hope that helps.

[tryingtostay]

Originally Posted by spj3210

Thanks for your reply, tryingtostay, and congrats on starting up the IRA!

So I've been looking into this issue more and still I'm so confused, in fact one site I read said that a short sale with no missed payments, or a DIL with no missed payments, would both show the mortgage as "settled" though I don't know what that means, assuming settled as in short settlement? B/c either way we have to settle our 20 percent loan which from the little advice I have been able to find re: how that's going to look on our credit report, it would look something like a short sale would. I feel like my goal right now w/the first lender is to do a DIL and not miss any payments, does that make any sense? I think the major issue there is getting the lender to agree to a DIL with no missed payments yet..

And.. I was reading today too that even with a short sale, expect to wait 5-7 years before you are able to buy another house. Where on earth can I find the accurate, current information on this stuff?

If you do a short sale or DIL, it would show that the creditor agreed to settle the debt for less than what you owed. If you owe $100K, and are able to settle for $50K, it will show that. And negotiating your debt amounts down never looks great on your credit score, but certainly looks better than foreclosure.

Did you post in the specific lender forums to get help negotiating with your lenders?

One thing I noticed was that the phone calls started the first month I was late. My payments are due the 1st. By the 3rd they were calling, although I was not technically late until the 16th. I paid one month on the 28th and although I got hit with a $45 late fee, because I was not 30 days late I had no reports on my credit score. A nice negotiator would take off the late fees, too. LOL, in fact, I think the mortgage company has taken off 2 of my 4 late fees out of the kindness of their hearts; I didn't ask for that.

I've heard from a couple attorneys most mortgage companies won't accept DIL without having your house listed as a short sale for 90 days or so.

Read the Fannie Mae, Freddie Mac, FHA websites for accurate info. Right now it is 2 years for short sales, 5-7 for foreclosures. BUT that is from the date of reporting on your credit. So if you started in March, that may be 2.5-3 years from now....