Loan Modification and Credit Scores

Family Buying a Home
Dear Experian,

How will a loan modification affect my credit scores? I've never been late on my payments and have been approved for a modification without any late payments.


Dear HBO,

You are wise to question the impact of a "loan modification" on your credit history and credit scores. The answer is that it depends on the "modification" program.

The Home Affordable Modification Program

Loan modification through government programs, 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.

Such programs are intended for people struggling with serious debt problems. In order to qualify, you may already have to have serious debt repayment difficulties. If so, you shouldn't be concerned about your credit scores because they are already probably poor and you aren't in a financial position to take on new debt.

Loan Modification Vs. Debt Settlement

Other programs may be referred to as "loan modification" but could hurt your credit scores because they are actually debt settlement.

Intentionally allowing a mortgage or any debt to become delinquent will result in the account payments being shown as late in your credit history, and your credit scores will suffer. If you negotiate a lower interest rate or reduced repayment, the account might also be reported as "settled" or "paid for less than originally agreed," which also will hurt your credit scores.

Before entering into a "loan modification" be certain to carefully review the contract terms and understand how your payment history will be reported. Anything other than paid on time and in full will have a negative impact.

Thanks for asking.
- The "Ask Experian" team

The purpose of this question submission tool is to provide general education on credit reporting. The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team may include it in a future post and may also share responses in its social media outreach. If you have a question, others likely have the same question, too. By sharing your questions and our answers, we can help others as well.

Personal credit report disputes cannot be submitted through Ask Experian. To dispute information in your personal credit report, simply follow the instructions provided with it. Your personal credit report includes appropriate contact information including a website address, toll-free telephone number and mailing address.

To submit a dispute online visit Experian's Dispute Center. If you have a current copy of your personal credit report, simply enter the report number where indicated, and follow the instructions provided. If you do not have a current personal report, Experian will provide a free copy when you submit the information requested. Additionally, you may obtain a free copy of your report once a week through December 31, 2022 at AnnualCreditReport.