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With the economy teetering from to the coronavirus, many consumers face declining income from lost hours and even losing their jobs. Some inquire about the possibility of skipping loan payments on their homes or auto from the loss of income. Is this a possibility – and will it impact your credit report / FICO® scores? 
 
Let’s take a closer look.

Whenever payments are skipped, it can be considered a missed payment, even when the lender agrees to your request to skip a payment. As a result, a 30 day late payment can be reported on your credit report dropping your credit scores. There is a lot of variance by lenders if they report a late payment. Too often I have heard consumers complain that their lender agreed to allow them to miss a payment, only to have it report as late on the credit report. This is the first concerned. 

The second concern can be utilization ratios on mortgages, student loans and auto loan payments. This concern is primarily an issue when the loan is a recently open loan. Take a $15,000 auto loan that was opened a couple of months ago. The balance on this loan is usually right under the initial loan amount of $15,000 -- say $14,700. When payments are skipped, the interest on this loan continues to accrue and increase the balance past the initial loan amount - say $15,500. Whenever a loan has a balance in excess of the initial loan amount, it drops the consumer's credit scores.

Add a late payment to that high balance of $15,500 and the FICO scores drop even further.

For this reason, skipping any payments even if the lender agrees to it, carries additional risks to your credit rating. It is best to ask questions to your lender before you agree to any possibility of skipping loan payments. You should ask if late payments will be reported and how your loan balance will be reported.

 

 

 

 

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