Worrying about your credit report might seem like something your parents or grandparents would do, but once you're on the credit-reporting grid, the topic becomes universal to all ages. One reported late payment can cost you a 110-point credit-score dip, and a lower credit score makes it harder to qualify for loans or credit cards. Paying your bills on time keeps your credit clean, but what exactly do your creditors report about paying a home loan and what do the credit reporting agencies track about your mortgage?
Your mortgage lender investigated you to determine you qualified as creditworthy before making your loan. In the pre-computer world, lenders asked you to use a coupon book of payment slips to snail mail your payments to the bank. In the modern world, the lender typically receives mortgage payments by automatic withdrawals from your bank account. Some lenders demand automatic payments from your paycheck every month, if your credit history is new and you have few credit cards or loans. If your mortgage loan adjusts periodically, check for changes to the grace period. Some banks make changes with the new interest rate. If your mortgage is sold or traded to a new lender, also note any changes to your official grace period.
A credit grace period gives you a few days between the official due date and the time the creditor charges you a late fee. The only people aware of the exact due date and your grace period are you and your lender. Once the grace period ends, the lender notifies you of the failure to pay and charges the late payment fee. The amount of this fee is listed in your mortgage agreement. Once the loan arrives at the 30-day late mark, the lender notifies the credit agencies, although some lenders report to the agencies when the loan hits the 15-day late date, if you have been late paying your mortgage in the past.
Credit reporting agencies list the date you took out your mortgage and the original amount. Your record also lists the current amount due on the loan and if your payments are current. If you have a second home loan or a line of credit with your house used as the security, the report also lists these amounts and your payment history. As long as all of your mortgage and home lenders are happy with your payment arrangements and don't report any late payments, your credit report remains clear of any dings.
Building Your Credit
Paying your mortgage on time helps build a credit report to use in applying for other loans and credit cards. If you're habitually late in making your mortgage payments, even though your bank never charges a late fee, you may find your bank less likely to refinance your mortgage, if you apply.
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- Freddie Mac: Glossary of Finance and Economic Terms -- Grace Period
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- New York Times: Mortgages -- Paying on Time
- My FICO: Credit Basics -- About Credit Reports
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