Will a Loan Modification Hurt My Credit Score Any?

Reader Question: "My husband and I are pursuing a loan modification to lower our monthly payment. I was wondering if this would affect my credit score at all, or would it make a difference at all. Thanks."

In most cases, a mortgage loan modification would not affect your credit score at all. If your lender modified the loan in some way, they would probably do it to help you avoid foreclosure and stay in the home. So in this kind of scenario, you would be able to continue making your monthly payments. The lender would have nothing negative to report, so the modification would not impact your credit score in any way.

Again, this is usually what happens when a lender or loan servicer modifies a mortgage. But there are exceptions to every rule.

While the modification probably won't hurt your score, there is still a connection between the two. When to try to change a home loan in some way, whether its by refinancing or modifying, the lender will typically review your credit score. They do this to see what kind of interest rate you're qualified for, given your current score and other qualifying factors.

If you're in need of a home loan modification, it probably means you are falling behind on your monthly mortgage payments. In that case, your top priority should be staying in the home -- if it's at all possible to do so. If you feel that your financial problems are temporary, and you can get back on track with your mortgage payments, then focus your energy on the modification and don't worry too much about your credit score right now. Like I said, a loan mod should not hurt your score in any way. Not in most scenarios, at least.

I hope this helps you out. If you have other questions about this topic, type them into the search box at the top of the blog. You may also want to review the articles listed below.

Related Article: How do home loan modifications work?

Good luck with your mortgage mod. I hope it all works out for you. If you'd like to update me later on with the status of your situation, I can add it to this blog post to help other readers.