How much does it really hurt your credit score if you are late on your mortgage? What if you default and are foreclosed upon? Until recently, all we knew was that it was “bad.” Canceling a credit card was “bad.” Missing a payment was really “bad.” Defaulting was one of the worst “bads.” What we didn’t know was how bad it actually was because the FICO credit score equation has always been a black box.
Well it turns out that we might get a little peek into the black box.
Fair Isaac Corporation, creator of the FICO credit score, recently released some data on how your score is affected by certain “adverse actions” – being 30 days late on a mortage payment, a foreclosure, bankruptcy, short sale, etc. They also estimated how long it would take to fully recover from the action. I personally think it’s a little odd because, well, FICO created the score and the equation that calculates it.
Either way, the data is still compelling:
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