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Loan modifications are all over the place. There are many questions surrounding them and what the effects on credit can be.  This article answers some of the questions that may come up.

How a Loan Modification Affects Credit

By Kevin Redmon

A loan modification may be the solution for many homeowners to avoid foreclosure proceedings. The process involves negotiation on a loan in which the lender and borrower agree to adjustments on the original mortgage terms. The outcome of this form of negotiation can include lowered monthly payments, a reduced interest rate and even a lowered principal loan amount. The loan adjustments may be temporary or permanent, depending on the individual homeowner situation.

Credit damage will invariably turn up as a question for many homeowners seeking to prevent foreclosure. The following answers questions about whether a loan modification may affect your credit profile and what you can do about it.

Loan Modification, Credit Damage and Delinquent Payments

Credit damage is not the direct outcome from this form of loss mitigation negotiation. In fact, credit damage is usually the consequence of delinquent loan payments or failing to honor the original loan terms. Many homeowners already have negative marks on their credit profiles due to late and missed payments.

Loan Modification, Credit Damage and Principal Reduction

In some cases, loss mitigation negotiation may include a reduction in the principal amount due on the mortgage. Depending on the financial institution, some lenders may report the lowered loan amount as “paid less than full balance,” or something to that effect. While an unfavorable report, negotiation on a loan that leads to a principal reduction can often signal to future lenders the commitment to resolving a tough financial situation and taking steps to repair credit, especially when delinquent loan payments are already a factor.

Prevent Credit Damage With Professional Loss Mitigation Negotiation

In order to get the best outcome, loss mitigation negotiation should be carried by qualified loan modification companies. Reputable loan modification companies can successfully pilot the entire loan negotiation process, including the manner in which your lender reports the agreement to the major credit bureaus. A qualified loss mitigation specialist can bring a loan modification to terms on your behalf and negotiate to protect your credit profile.

Preventing foreclosure with loss mitigation negotiation is often the best way to avoid considerable damage to your credit rating. A professional firm can help protect your home, recover your mortgage situation and get you back on track.

Kevin Redmon covers loss mitigation negotiation articles for the website M3 Strategy, specializing in mortgages, loan modifications and short refinancing through their Finance Blog.

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With foreclosure running rampant in the economy today, I thought I would share and article about how foreclosure affects your credit.

Foreclosure Credit Damage – How Does Foreclosure Affect Credit?

By Bobby Tucker

When a homeowner hasn’t made their monthly mortgage payments for 3 months or more, their lender will usually starts the foreclosure process. There can be many reasons why they haven’t been able to pay their mortgage payments such as: loss of job, spouse’s death, medical issues, etc; however the outcome is always the same, Foreclosure! What many homeowners do not realize is the foreclosure credit consequences they will face.

Your credit report is a very important factor in your financial life. You need credit to buy a home or car, rent an apartment, get a loan, and even to get a new job! In today’s housing crisis more and more homeowners cannot afford to pay their monthly mortgage payments and are going into foreclosure. A foreclosure can ruin your credit score lowering it as much as 300 points!

3 Ways A Foreclosure Can Impact Your Credit Score:

1. Your credit score will instantly decrease 200-300 points once a foreclosure appears on your credit report. Even someone with a good credit rating such as a 700 will be drastically affected by a foreclosure after their score lowers to around 400…

2. A foreclosure can stay on your credit report for up to seven years and the effects of foreclosure credit consequences can last many years after. It’s important for homeowners to understand how difficult it is to recover your credit score after a foreclosure.

3. Lenders cannot offer you financing for 24 months following a foreclosure. This means you cannot get a personal loan, car, new home, credit cards, and even utilities such as cable are dependent on your credit rating. In addition it will be next to impossible to be approved for another mortgage loan for at least 3-5 years depending on the situation.

Foreclosure should almost always be a homeowner’s last option to avoid the foreclosure credit damage that so many homeowners have learned to late. There are many foreclosure alternatives available to homeowners such as: Deed in lieu of foreclosure, a short sale or “short pay-off”, and a loan modification. If you are in or facing foreclosure, now is the time to act and do something to save your home and credit score…

Get your Free Do It Yourself Loan Modification Kit. This DIY Loan Mod Kit includes everything you need to complete a loan modification on your own. It will teach you how to negotiate with your lender and most importantly what NOT to say to your lender. The secret to a successful loan modification is how you present your case to the lender. This DIY loan mod kit will explain the loan modification negotiation process in explicit detail.

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