How mortgage delinquency impacts FICO scores finally made public

Distressed homeowners will feel the pinch

It makes sense that if you don’t pay your mortgage, your credit score takes a hit, right? Until recently, no one could pin down the exact science credit bureaus were using to penalize delinquencies and the bureaus were very tight lipped about the process.

CNNMoney.com reports that Fair Isaac (which developed FICO scores) has come public with “estimates of point-score declines following mortgage delinquency problems.”

According to Fair Isaac, here is the credit score docking for mortgage delinquency:

• 30 days late: 40 – 110 points
• 90 days late: 70 – 135 points
• Foreclosure, short sale or deed-in-lieu: 85 – 160
• Bankruptcy: 130 – 240

Some borrowers will be hit harder than others, depending on other credit factors (especially other mature accounts that are in good or bad standing).

Advising distressed homeowners

Most distressed homeowners aren’t choosing not to pay their mortgage, there is typically a distressing factor like loss of income.

That said, a credit score is the last thing on a troubled homeowner’s mind, but it is important that as professionals that deal with distressed homeowners on a more frequent basis than in the past, it is important to be armed with this type of information should the question arise.

Confusion is at an all time high as news that participation in HAMP impacts credit scores and up until now, no one knew the average credit score hit mortgage delinquencies, so this information is timely and important not only to the consumer but to the real estate professional.

CC Licensed image courtesy of thisisbossi via Flickr.com.