Loan modification could hurt your credit scores depending on how it is modified

House and Keys in Female Hands


Dear Experian,

I am interested in a modification on my mortgage loan. I would like to modify my repayment When I asked the bank if a modification would negatively impact my credit scores, I was told that it may be reported to the three credit reporting companies, but that the impact to my credit scores would be up to you. Would a modification, lower monthly payments or deferred payments lower my credit scores?



Dear RYR,

Loan modification programs were created to help people keep their homes after they became financially distressed and unable to make their mortgage payments. They were never meant to be a means for people who could afford their mortgage to reduce their monthly payments. For that reason, qualifying for a true mortgage modification program can be difficult.

Whether or not a loan modification will affect your credit scores depends on the kind of plan or program you are being offered and how the lender reports the account. Experian doesn’t decide how the account is reported or if it affects credit scores. Many mortgage modification programs require that you already be delinquent on your payments in order to qualify. Even one missed mortgage payment will have a negative effect on your credit scores.

Loan modification through some programs, particularly those endorsed by the U.S. government, such as the Home Affordable Modification Program (HAMP), may have no impact at all. Such programs include loan reporting requirements that result in the mortgage continuing to be reported as current and paid in full, if the requirements of the program are met by the homeowner.

Other programs may be referred to as “loan modification” but could hurt your credit scores because they are actually debt settlement. Before entering into a “loan modification” be certain to carefully review the contract terms and understand how your payment history will be reported.

If the account is reported as anything other than paid on time and in full it will have a negative impact on your credit scores.

Thanks for asking.

The “Ask Experian” team

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