What kind of damage to your credit happens after 1 missed mortgage payment?
Oddly, it depends on if you have good or bad credit to start with. Those with good credit suffer more than those with bad credit. (Answer: It’s about a 60-100 point drop in your FICO score for one missed payment.)
This great post talks about the effects of missed mortgage payments, short sales, foreclosure and bankruptcy on the owner’s FICO score. The post refers to a chart on the FICO blog that details how these events affect credit scores and how long it takes to recover from each one.
This is required reading for anyone weighing their options among foreclosure/short sale/bankruptcy.
Most interesting to me was that your credit suffers more if you have a deficiency balance after a short sale than if there is no deficiency balance. I find that deficiencies are NOT forgiven in most short sales, so the credit effect of a short sale with no release is the same as a foreclosure!
I review the credit of many clients and most of them are around 520 to 600 after they have missed three mortgage payments (much lower than indicated in the chart).
As far as recovery of credit after goes, one can get a new FHA mortgage with a 620 FICO score (after the required wait), and that’s not too much of a leap from even the lowest levels listed.