How Missing A Rent Or Mortgage Payment Could Affect Your Credit Score.
In March, Congress passed the CARES Act, which included a temporary ban on evictions. The temporary eviction relief only lasted through July 24 and shielded renters and homeowners living in homes funded by federally backed mortgages or who rely on housing vouchers.
The eviction moratorium protected roughly a third of renters; its expiration has put millions of families at risk of losing their homes in the middle of the unprecedented public health, unemployment and economic crises.
On August 8, President Trump issued an executive order which merely instructed various administration officials to consider whether further action is needed to stem the pending wave of evictions nationwide.
Congress has been negotiating with White House officials to reach an agreement for another broad stimulus package, which could include another eviction moratorium. So far, the negotiations have failed, and it’s unclear when another stimulus bill will be signed into law.
Missing Housing Payments Can Significantly Lower Your Credit Score
Nearly 1-in-3 Americans failed to make a full on-time rent payment in July. That was before the federal $600-per-week unemployment benefit expired at the end of the month. Without a second $1,200 stimulus check in sight and reduced unemployment benefits, it’s expected that even more Americans will fall behind.
Shelter, food and clothing are among the most basic needs that humans have. The prospect of losing a home and being thrown into the streets is horrifying, and it is often accompanied by the loss of possessions and other essential services. Eviction destabilizes the entire family unit, and it can cause families to fall further into a dangerous spiral that nearly impossible to escape; having an eviction on your public record can make it extremely hard to find another place to live in a safe neighborhood.
However, even if you aren’t worried about eviction, missing a rent or mortgage payment could significantly hurt your credit score or make future landlords wary of approving you as a tenant. However, it’s important to know that not all landlords report missed payments to the credit agencies.
In fact, many landlords who only own a few units likely don’t report missed payments directly to the three major credit bureaus. However, if they hire a collection agency, move forward with eviction proceedings, or win a civil judgment against you, it is much more likely that you will see the marks reflected in your report. If you have a mortgage, your lender will likely report any payment over 30 days late to the credit bureaus.
A low credit score will limit your ability to access credit in times of need or cause you to pay more when you borrow. The damage to your credit isn’t the full story either since landlords and banks charge late fees, making it harder to catch up.
A single late payment can lower your score by more than 100 points and the negative mark can stay on your credit for up to seven years. Higher credit scores are more vulnerable to big drops since a lower initial credit score already takes previous derogatory marks into account.
Having Strong Credit Can Save You Money
Do you plan to purchase a home, refinance your student loans, or open a credit card in the future? If so, having an excellent credit score of 760+ can allow you to qualify for the lowest interest rates and best terms possible.
When it comes to big purchases like homes and cars, shaving a few percentage points off of your interest rate can quite literally save you thousands of dollars. The Instagram image below is an illustrative example of the difference between two auto loans with different interest rates.