Credit Score Basics > What happens if you miss a mortgage payment?

What happens if you miss a mortgage payment?

Wollit Team2 minute read · Updated 23rd September 2024

Missing a mortgage payment can lead to serious problems, both right away and in the long run. Here is what actually happens and what you can do to lessen the impact.

What usually happens when I miss one mortgage payment?

When you miss a mortgage payment, you can expect a few things to happen:

First, the lender will contact you. This doesn’t always happen but it usually does. They might also give you a grace period of about 15 days to make your payment without extra charges.
If you don’t pay within this grace period, your mortgage lender will often charge late fees. How much you have to pay depends on your mortgage agreement – you might want to read it first.
If your payment is more than 30 days late, the lender will report it to credit reference agencies (CRAs) like Experian, Equifax, and TransUnion. This can immediately hurt your credit score, and it will also stay on your credit report for the next six years.
If you don’t pay for 90 days or more, your account may be marked as in default. This is really serious. Not only will your credit score drop even more (by about 250 points or so), but you might even be foreclosed, which means you will lose your property.

How does missing a single payment affect my credit score?

Your credit score is very important for getting future loans and mortgages. Here’s how missing a mortgage payment impacts it:

Missing one payment can lower your credit score by about 50-80 points. For example, if your score was 793, it might drop to between 710 and 730 after missing one payment.
If the missed payment has been reported to the credit agencies, it will stay on your credit report for up to six years. However, its impact on your score decreases over time, especially if you take steps to always keep making payments on time after that.
Also, the effect of late payments is worse if you had a high credit score before missing the payment. If your score was already low, the impact may not be as bad.

What should I do if I miss a mortgage payment?

The most important thing you can do if you miss a mortgage payment is to settle it as quickly as you can. If you pay within 30 days of the due date, it may not be reported to CRAs at all and it will be as if it never happened.

Even if you can’t afford paying it now, you should still talk to your lender about what happened. Many lenders are willing to help you if you are genuinely facing temporary financial issues.They might have some options for you, like repayment plans or even temporary relief.

Once it’s settled, set up alerts, reminders, or automatic payments to avoid missing future payments.

Finally, you should take steps to keep building a solid credit profile.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app that reports your monthly subscription as loan repayment, helping you build a history of timely repayments, which is really what lenders care about. Eventually, a strong credit history should help you reduce the impact of a single missed payment in your overall credit file. This will come in handy if you’re ever considering a remortgage or even a second property.