The Impact of Late Payments on Your Credit Score
One of the most immediate and potentially significant consequences of a late mortgage payment is the impact on your credit score. If your payment is over 30 days late, it can be reported to credit bureaus and may lead to a drop in your credit score. How much your score drops can vary, but a decrease in your credit score can affect your ability to secure future loans, credit cards and even your insurance rates.
Moreover, late payments remain on your credit report for up to seven years. This prolonged impact can make it challenging to qualify for other financial products, such as a refinance or a new home purchase.
Effect on Refinancing and Future Home Purchases
Timely mortgage payments are essential if you plan to refinance your current loan or purchase another property down the line. Lenders will review your payment history, and multiple late payments can hinder or even disqualify you from refinancing altogether.
When looking to purchase a new home, potential lenders may be concerned about a poor payment history on your existing mortgage. They may view you as a higher-risk borrower, which can result in less favorable loan terms or even denial of your mortgage application. For Carrington customers who are currently up-to-date on their mortgage payments but have a less than perfect credit history, our Flexible Advantage Plus program may be a good option.
Leverage AutoPay to Avoid Missing Payments
Using AutoPay is an excellent strategy for avoiding the negative effects of late payments. AutoPay ensures that your mortgage payment is automatically deducted from your bank account on a specified date each month. This establishes timely payments, which allows you to confidently avoid late fees.
It's important to note the difference between bill pay and AutoPay. Bill pay is a service offered by your bank to schedule payments to your mortgage lender, while AutoPay can be set up directly with your mortgage servicer. AutoPay ensures that you’re paying the correct amount every time, and adjusting accordingly if there are changes with your escrow account, taxes or homeowners insurance. Bill pay, however, may not necessarily be set for the correct payment amount and won’t automatically adjust – leading to incorrect or incomplete payments that may appear late.
To set up AutoPay, log into your account at CarringtonMortgage.com and click “AutoPay.” If you're eligible for AutoPay, our mobile app (available on Apple and Google Play) allows you to choose "Set Up AutoPay" in the menu directly from your phone! All you need to do is enter your financial institution's information, along with your scheduling choice for payments.
Ultimately, paying your mortgage on time is paramount to maintaining a healthy credit score and securing your financial future. By utilizing AutoPay, you can ensure you’ll never miss a payment and that your payments are always accurate.
Are you looking to enjoy the peace of mind that comes with knowing your mortgage is always paid on time? Learn how you can take advantage of Carrington’s AutoPay today!