by RICHARD MOXLEY Contributed to The Globe and Mail –
Excerpted with permission from The Nine Rules of Credit: What Everyone Needs to Know by Richard Moxley, Published by Self-Counsel Press.
Your mortgage payment doesn’t always show up on your credit report, but if you are late on multiple payments, it could affect the interest rate you’re offered from the bank when your mortgage comes up for renewal again.
If you miss three consecutive payments or more in a row, it will lead to foreclosure proceedings, which is when the bank or lender starts the process of legally taking ownership of your property due to the lack of payments. Banks or lenders don’t want to own your home, but if the lender isn’t getting paid, it will try and sell the property in order to reduce its losses. Foreclosure shows up under the public record portion of your credit report.
You may assume that bankruptcy is the worst thing you can do for your credit; however, if you are applying for mortgage financing, going through a foreclosure is the absolute worst thing you can do for your credit. Bad credit can be rebuilt fairly quickly, but very few lenders will look at providing financing for you if you have a previous foreclosure showing up on your credit report, regardless how strong your current credit is.
If you find yourself in a situation where you may not be able to make your mortgage payments, contact your mortgage lender or mortgage agent to find out what can be done. The same thing is true with any creditor.
If you don’t think you’ll be able to make a payment to any one of your creditors, it is a good rule of thumb to contact them to see if something can be worked out, especially if you contact them before the due date. I’ve never seen the attitude of pretending it will all go away actually work for anyone.
I understand that despite your best efforts, an emergency may come up, preventing you from being able to make a payment. However, the banks still feel that it is your responsibility to keep track of your accounts and pay your bills on time. Get your head around this rule and you will have a great foundation to always have amazing credit.