How Credit Scores Change With Credit Problems

What Makes Up My Credit ScoresA common question many people have about their credit scores when they are looking to qualify for a mortgage using a VA loan or FHA mortgage for example is how their scores are affected when they miss a payment, max out a credit limit, or have some other credit problem.

Financial difficulties impact credit scores in different ways. But it is difficult to be exact on the changes to your credit scores if you have problems with your credit report, making payments etc. This is because of the way that credit scores are determined.

Credit scores are determined by the credit bureaus using a complex proprietary mathematical system with many variables. In fact, we don’t know exactly what goes into making up your credit scores but we do have over 10 years of information about credit scores and credit reports that we can get close to what happens to your credit scores if you run into some financial problems that impact your credit. Below you’ll find a brief list of credit problems and the possible changes to your credit scores that you may expect to see.

  • Max Out Credit Card – 20-30 points
  • 30 day late payment – 60-100 points
  • Settling a credit card debt – 65-135 points
  • Foreclosure – 100-160 points
  • Bankruptcy – 150-240 points

Having problems with your credit report can impact when and how you qualify for a mortgage. It can even impact what kind of mortgage you can get. With lower credit scores you may have to look at getting an FHA mortgage, USDA mortgage, or a VA loan (if you are eligible) as all of these programs allow for some slight credit imperfection whereas Fannie Mae and Freddie Mac are very tight on credit scores and past credit history. No matter where you are in the country you may want to speak with a lender like to see what kind of mortgage program you can qualify for with prior credit problems.