How Do Events Impact Your Credit Score?

So how does foreclosure impact your credit score?  What about other damaging item like Bankruptcy? Until recently the credit agencies have been very secretive about what will happen to your FICO score after you start to fall behind on your payments. Just recently Fair Isaac, which is the company that developed FICO scores, has come out with some estimates (averages) on how your credit score will be impacted based upon mortgage delinquency. Here are their numbers…

  • 30 days late: 40 – 110 points

  • 90 days late: 70 – 135 points

  • Foreclosure, Short sale, or Deed-in-Lieu: 85 – 160 points

  • Bankruptcy: 130 – 240 points

 

Fair Isaac came up with these numbers based upon averages of different types of people, some of which had multiple (7-10) creditors and some with much less (1-4). They also factored in length of credit history, number of past missed payments and previous damaged accounts.

As you can see the credit penalty to your FICO score becomes much more dramatic once you get 90 days or more behind on payments. This is due to the likelihood of full payment decreasing after this time. Also these point losses affect someone with a higher score much more dramatically than someone with a sub-par score to start with.

So how do these FICO scores affect your personal finances? Well the average savings for someone with a good vs. mediocre credit score for auto insurance is about $115 a year. I’m not sure what type of car you drive but I’m sure that is at least a couple extra tanks of gas per year or a nice dinner on a birthday or anniversary. Point being everyone could use an extra $115 dollars. Now if auto insurance was the only thing affected by FICO scores… How about home owners insurance, car loans, home loans, renting an apartment, or getting a new job. Credit scores affect your personal life in so many different ways. When you apply for a loan or job, remember that every point counts!

 

3 comments

  1. Casie Kunda

    Thanks for the suggestions about credit repair on this excellent site. What I would tell people will be to give up the mentality they can buy now and pay later. As being a society many of us tend to do this for many things. This includes vacations, furniture, and also items we want. However, you should separate your current wants from the needs. While you are working to boost your credit score you really have to make some trade-offs. For example you possibly can shop online to save cash or you can click on second hand outlets instead of high-priced department stores regarding clothing.

  2. Short Sale Realtor

    I was doing a little research about this topic and stumbled across this. Great post, I’ll definitely bookmark it for future use.

  3. Foreclosure Specialist

    Great article. I am a Phoenix area Realtor myself who specializes in short sales. Prices are dirt cheap down here right now and it is without a doubt more affordable to buy rather than rent in most price ranges.

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