How A Late Charge Can Hurt Your Real Estate Plans

As a real estate professional, I see how a strong credit score is the cornerstone of a successful home purchase. Your creditworthiness directly impacts your ability to secure a mortgage loan and the interest rates you'll pay. Understanding how credit issues like a late charge or credit charge-offs can derail your homeownership dream is crucial.

The Ripple Effect of Late Charges on Credit Card Payments

At first, it doesn't make sense. OK, so you were late, and we all know ‘time is money’. You finally made the payment and even paid the ‘late fee’. What’s the big deal? 

Well, life happens, and sometimes a payment slips. While a single, isolated late payment (especially if it's less than 30 days past due) might not immediately trigger a massive credit score drop. But habitual tardiness can be detrimental. Lenders often refer to this as lack of ‘willingness to pay’. 

And if you want them to be willing to lend you enough money to buy a home, they want you to be willing to pay them back.

The Bold Red Letters and the Pink Envelope It Came In Mean: "This Is Going To Cost You!"

Lenders typically report payments 30 days or more late to the major credit bureaus (Experian, Equifax, TransUnion). One negative mark can significantly lower your FICO score, affecting your Interest Rate or your ability to borrow money at all.

Even if you catch up quickly, that late mark can stay on your credit report for up to seven years, signaling payment history issues to future lenders. You don’t want to be on their radar!

The Severe Impact of a Credit Charge-Off

Far more serious than a late charge is a credit charge-off. This occurs when a creditor, after several months of missed payments (typically 180 days past due), gives up on collecting the debt and writes it off as a loss. It's a clear indication that you haven't fulfilled your financial obligations.

A charge-off can severely damage your credit standing, potentially dropping your credit score by 100 points or more.

It gets worse!

While the debt is considered a loss for the original creditor, you still legally owe the money, and the account may be sold to a collections agency. A charged-off account remains on your credit report for seven years from the date of the initial delinquency, making it extremely difficult to get approved for new credit - especially for a loan like a mortgage.

Rejection Never Feels Good, But A Home Loan Rejection Is Something That Can Hurt Now and in the Future !

Protecting Your Credit for Your Real Estate Goals

For aspiring homebuyers, maintaining excellent credit health is paramount. Regularly monitoring your credit report for accuracy and addressing any discrepancies immediately is a smart move. Prioritize on-time payments for all your debts.

Payment history is the largest factor in credit score calculation. If you anticipate difficulty making a payment, communicate with your creditors to explore options before it negatively impacts your credit.

Now This Is More Like It! Home Ownership Can Be the Start of a Bright Future and 'Generational Wealth'!

A strong credit profile can mean the difference between qualifying for a Home Loan and facing loan denial. Don't let late payments or charge-offs stand between you and a bright financial future!

Curious about your Credit Report picture? Contact us for a list of providers to assess and even increase your credit score!