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Topics addressed on May 23, 2012:
Loan modification denied because borrower can still make payments
I recently applied for a loan modification on my mortgage, but they did not qualify my application saying that based on the information I provided they felt that I can still pay my mortgage. I never stopped my payment and am still paying but wonder if just applying for the loan modification will hurt my credit?
Loan modification programs were designed to help people who became unable to pay their mortgage loans because of economic realities beyond their control, such as being laid off from their job or becoming ill. They were never designed or intended to be used to reduce monthly payments for individuals who could make their payments under the original mortgage contract.
Applying for the loan likely resulted in an inquiry being posted to your credit history, which can have a temporary negative impact on credit scores. Usually, one inquiry alone will not have a substantial affect on your credit scores. However, lenders become concerned when they see too many applications for credit within a short period of time.
A related question is whether having your loan modification application declined will hurt your credit scores, and the answer is no, it will not. Your credit report does not indicate if an application was declined or approved.
The modification was not denied because you had credit problems, but rather because you were able to manage your debts with your current income. Your credit history is very likely in good shape if you are making all of your debt payments on time and in full, including your mortgage.
Thanks for asking.
- The "Ask Experian" team