Missed or Late Mortgage Payment: Payments 30 Days Late or Less Do Not Affect the Credit Report

The due date on a mortgage seems quite unforgiving and dangerous. In reality, being slightly late on a mortgage is much less of a problem than being one day late on a credit card payment. If a credit card payment is late by just one day, the interest rate on the entire credit card balance could rise up to a 29% APR. On the other hand, a late mortgage payment has absolutely no negative consequences for the first 15 days late, and relatively few consequences for the next 15 days after that.

Mortgage Due Date

The monthly payment has a due date listed in the home loan billing statement. The bank expects the borrower to pay by that date every month. In practice, a lot of borrowers do not pay any attention to this date, because of the mortgage's grace period for late payments, which is usually 15 days.

Late Payment of 15 Days or Less

If the late payment is made within 15 days after the due date, there is no negative consequence even though the payment is technically late. The mortgage is reported to the credit bureaus as being paid on time. The first 15 days after the due date falls within a mortgage's grace period. The original intent of the the grace period was to factor in delayed payments going through the mail system. Today, many borrowers intentionally pay their home loan electronically on the 14th day after the due date because of the penalty free grace period.

Late Payment More Than 15 Days Late

Problems begin to crop up once a payment is more than 15 days late. The borrower will get a 15 day late notice in the mail from the bank. The bank will also add a late fee to the mortgage account, which needs to be added to the late payment. As long as the payment is made without becoming 30 days late, the only consequence is the late fee. The credit bureaus will continue to report the mortgage as being paid on time as long as the late payment does not exceed 30 days.

Be careful of the late fee; it can cause lots of problems. If the following month's payment does not include the late fee, the late fee will cause a 30 day late to show up on the borrower's credit report, which could drop his FICO score significantly. If an online bill pay service is used, the borrower needs to remember to modify the following month's payment to include the late fee or face a big negative mark on the credit report.

Late Payment of Over 30 Days

If a mortgage payment is more than 30 days late, the late will be reported to the credit bureaus which will have a negative effect on the borrower's credit report. Along with the drop in the borrower's FICO score, the 30+ day late payment is the first step towards home foreclosure since the loan is technically in default. The lender will begin sending letters and making phone calls in an effort to get the borrower back on track. This is the point when borrowers need communicate with their lenders if they are facing financial difficulties. In some cases, banks may be willing to do a loan modification such as Obama's Making Home Affordable plan.