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Your mortgage loan appears on your credit report and affects your credit score. Thus, changes to your mortgage loan’s status due to your behavior will impact your overall credit rating.
Payment History
The Fair Isaac Corporation states that your payment history to each of your creditors accounts for 35% of your credit score. Paying your mortgage on time every month is beneficial to your credit score. If you make late payments, however, a record of your delinquent payments appears on your credit report and hurts your score.
Cash-Out Refinancing
If you cash out the equity in your home via a cash-out mortgage refinance, your credit score could take a hit. The reason for this is that the amount you owe your creditors accounts for 30% of your score. Cashing out your equity leaves you with additional debt that appears on your credit report and impacts your rating.
Foreclosure
Foreclosure is a significant negative entry on your credit report. A foreclosure occurs when your mortgage loan goes into default due to nonpayment and your lender seizes your home through legal proceedings. A foreclosure can make it difficult for you to obtain new mortgage financing for several years. The credit bureaus will remove your foreclosure notation after 7 years.
