FICO reveals credit score damage from mortgage late pays, foreclosure

Study shows how many points you lose, and how long it takes to recover

Homeowners who pay their mortgage late may see their FICO credit scores slashed by more than 100 points -- damage that can take years to recover from, according to a study released by the credit scoring company.  

Research conducted by leading U.S. credit score creator FICO considered the impact of several types of mortgage mishaps -- including late payments of 30 and 90 days, short sales, foreclosures and bankruptcies -- on consumers who started out with fair, good and excellent credit. Those consumers had starting FICO scores of 680, 720 and 780, as well as credit reports that included information typical of the three scores considered. The three borrowers also had current mortgages that had been paid as agreed prior to the mortgage mistakes. Then FICO ran simulations to see what delinquencies could do.

So what did FICO find? According to the study results, the extent of the damage resulting from mortgage problems highly depends on the borrower's initial credit score. Higher starting FICO scores, for example, typically fall farther and take longer to fully recover than lower scores. Depending on the borrower's starting score, recovery time can stretch from 9 months, in the case of a 30-day late payment, to as long as a decade, in the case of a bankruptcy.  

The chart below includes the results of FICO's study:

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Impact of mortgage mistakes on FICO score
  Consumer A Consumer B Consumer C
Starting FICO score About 680 About 720 About 780
FICO score after these events
30 days late on mortgage 600-620 630-650 670-690
90 days late on mortgage 600-620 610-630 650-670
Short sale, deed-in-lieu or settlement (no deficiency balance) 610-630 605-625 655-675
Short sale (with deficiency balance) 575-595 570-590 620-640
Foreclosure 575-595 570-590 620-640
Bankruptcy 530-550 525-545 540-560
Source: FICO banking analytics blog

Estimated time for FICO score to fully recover
  Consumer A Consumer B Consumer C
Starting FICO score About 680 About 720 About 780
Time for FICO score to recover after these events
30 days late on mortgage 9 months 2.5 years 3 years
90 days late on mortgage 9 months 3 years 7 years
Short sale, deed-in-lieu or settlement (no deficiency balance) 3 years 7 years 7 years
Short sale (with deficiency balance) 3 years 7 years 7 years
Foreclosure 3 years 7 years 7 years
Bankruptcy 5 years 7 to 10 years 7 to 10 years
Note: All times are estimates that assume all else is held constant over time (i.e., no new accounts, delinquencies, etc.)
Source: FICO banking analytics blog

Since lower credit scores can make it tougher and more costly to borrow money, homeowners need to be very careful about fulfilling the terms of their mortgage agreements whenever possible.   

"From a consumer perspective, the most important takeaway is that the best way to protect your financial profile and FICO Score is to pay your obligations as agreed," says Joanne Gaskin, the product management director for Scores at FICO. "If you are having trouble meeting your obligations, contact the credit grantor before any delinquency, as many lenders are willing to work with consumers that have experienced negative life events (job loss, medical, etc.)," Gaskin says in an email.

While this study is the first time FICO has shared data on both the points lost and length of recovery time following mortgage delinquencies, the company has previously acknowledged the damage certain actions can have on a borrower's credit score. In July 2010, FICO shared the "damage points" that borrowers with credit scores of 680 and 780 would suffer following various mistakes, including foreclosures and bankruptcies.     

See related: FICO reveals how common credit mistakes affect scores

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Updated: 04-23-2019