Credit Reporting Standards For Loan Modification Vary By Lender
Credit Reporting Standards For Loan Modification Vary By Lender
All lenders that work with loan modification services are going to treat these modifications differently. Here are a few of the ways how a loan modification can be reported on a credit report when dealing with a loan modification. These are all options that can work to ensure that one can feel confident about getting into a loan modification and to see just how it can work with one's credit rating in mind. In many cases a credit reporting process will work to where the impact on the credit report one has will be very minimal. This comes from how one loan is not going to be canceled out in favor of a new loan like with refinancing. The terms of the loan will simply be changed. The reporting that can work will ensure that the borrower is not going to be impacted by the loan as much as one could be. However, it will help to take a look at how other types of lenders are going to treat this situation differently from others. A credit reporting process can work to where the lender is going to interpret the loan modification as a partial payment on a debt. This means that some of the money that was involved will be paid off but not all of it is going to be taken care of. This can be useful in that it will not involve any debts being settled. This is critical because of how difficult a settlement can be to any type of credit rating. However, the credit reporting process involved here will cause a borrower to be seen as someone who might not be able to make full payments when needed. This may impact one's credit rating in a bad manner. However, the fact that the mortgage loan will be easier to pay off will help to get this problem to be corrected over a period of time. The most significant type of credit reporting concern involved with a loan modification can occur in the event that a principal reduction is handled. This can occur in that the person who is dealing with the modification will end up owing less money over time. This can be useful but the problem is that the principal reduction that is involved will deal with a partial settlement declaration. The hit on one's credit rating will not be as severe as it could be with a standard type of settlement but it is still something that can be difficult for anyone to work with. All of these things should be seen when dealing with a loan modification. Each lender is going to treat loan modifications differently so it will be a good idea to watch for the lender's standards when it comes to getting the modification handled. It might help to research the lender first before entering a loan modification as a means of ensuring that one can be more comfortable with what is going on with some kind of a plan.