My answer to the question, "What happens to your FICO score after a loan modification?"

[Lel]

This question came up recently, and believe me, I've been wondering about the answer since I started the loan modification process in late October. Today I got my answer.

Unlike an ideal scientific experiement, I could not control all the variables, and there were several differences between my Score Power report from March 30 and today. These were the key differences:

1. One account previously classified as "new" has aged to over a year old. This is no longer a negative factor.

2. My average account age has gone from 9 years to 8. This is because two accounts opened in 1993 and 1997 have fallen off, and I was added as an AU to one of my DW's credit cards, which was opened less than 2 years ago. So, net (-1) account, and a loss of AAoA. My "length of credit history" bullet has gone from "great" to "very good".

3. My utilization of revolving credit has gone down, from 6% to 3%. This happened despite the fact that I recently lost $19,999 of cumulative revolving credit through the involuntary closing of one card and a credit limit decrease of another.

4. One inquiry has fallen off. Only one inquiry remains.

5. The modified mortgage loan has a higher balance than before - about $1400 more, due to deferred interest payments. However, my total mortgage indebtedness is less than $100 higher, because I have been paying down my HELOC.

This is what hasn't changed:

1. The open date of my modified mortgage is still the original open date.

2. My mortgage account number is unchanged.

3. The number of accounts with balances is unchanged.

My EQ FICO score on March 30 was 790.

My EQ FICO score on May 15 is 814.

Oh, that whooshing sound you just heard? That was my sigh of relief.

[Anonymous]

Wow, I wish I could have that same "whoosh" sigh of relief.......I, too, had a loan modification done.  It took well over 14 months with Citibank.  I was told my FICO score would not be affected.  It was 785 before the modification, now it is 667.  No one can seem to tell me why this is.  Does anyone have any answers to this? 

[ShanetheMortgageMan]

Were there any comments added to the trade line?  Such as "Under Modified Payment Plan"?

I'm sure Lel will chime in again and he's become quite the expert on how modifications are affecting credit.

[BungalowMo]

Am I seeing this correctly....Lel's original post was 1 year ago...with no replies til now??

[ShanetheMortgageMan]

You are seeing correctly, it was a good post, and probably was found via a search engine.

[Lel]

Hi lalv67, and welcome to the FICO Forums.

The first question is whether you were late at all prior to or during the modification process.  Getting a loan modification doesn't eliminate any past delinquencies, and this can drop one's credit score.

The second question is whether this was modified using the government's Making Home Affordable plan.  If so, then there may have been a comment added to your loan ("Paying on a partial or modified payment plan") during the trial period, which could be responsible for your 100+ point drop in credit score.  However, once the loan modification is finalized, this comment is supposed to be changed to "Loan modified under a federal government plan".  Right now, this comment does not have any negative effects whatsoever on one's credit score, because this comment is too new for Fair Isaac to know what this means in terms of future credit risk.  So it hasn't been incorporated into their scoring formulae.

Like Shane said, look at how your mortgage is currently reporting.  Look for any added comments to the account entry.  Also, look over the rest of your report to make sure that there isn't some other explanation for your score drop.

FTR, I started the loan modification process several months before the new administration unveiled the Making Home Affordable program.  So mine was not a government-sponsored modification, and thus it was not subject to the fairly well-defined reporting guidelines that the Consumer Data Industry Association (the trade group that represents the credit reporting agencies) established for MHA.  Even if I had suffered a score hit, however, I think I'd still feel a relative "whoosh" of relief, because this modification is saving me thousands of dollars in interest over the life of my loan.

[Anonymous]

Actually it does say "paying under a partial or modified payment agreement"  I wondered if that could be why.  However, I was never late with a payment and held up my part of the agreement in every way during the trial period.  I repeatedly asked if my credit would be affected and they assured me it wouldn't. 

[Lel]

So was this a government modification program?  Or was it an "in-house" modification?  Do you know whether your loan was backed by Freddie Mac or Fannie Mae?

[Anonymous]

Thank you for that.  The modification was finalized in February yet the wording has not been changed.  Will this in itself bring the score back up?  Who do I contact to make sure it gets done? 

Thank you so much for your knowledge and assistance!!!  As many on this forum, I worked hard to get my credit score that high to begin with.  I was not one of "those" people that got in over my head during the boom.  My husband is a self-employed carpenter and is taking in 80% less than he was prior to this happening.  We could well afford the mortgage during those days, but certainly, due to the circumstances, I was glad the bank could make my mortgage payment more affordable for now.  And I'm not giving up on getting the score back to where it should be.

[Anonymous]

It was government sponsored and it was Freddie Mac..........