Mortgage Relief OK For Credit Rating

Though millions of Americans have their fingers crossed for federal assistance when it comes to making their mortgage payments during these times of financial hardship, many have questions about the impact in the long run of such aid. One big question is this: will using the Obama Administration’s program hurt my credit score?

In a word, no. Since refinancing is really just rewriting a mortgage agreement, it doesn’t usually affect a homeowner’s credit score. And since one of the terms of the federal program is that a qualified participant cannot have missed a payment during the previous year, the person in question’s credit is probably protected.

The difference is, if the homeowner is applying for a loan under Making Homes Affordable, he or she already has missed a payment within the last year. Since mortgage companies do report to credit bureaus, the credit score will then already be affected, regardless of the assistance program.

In fact, in that circumstance, a homeowner can better his or her credit score by making use of the aid, since the purpose of the program is to help get back on track.

And since lenders don’t expect you to have perfect credit, it’s better to use the program and maintain payments with less-than-perfect credit rather than try to fly it solo and hope for the best.

As far as tax questions concerns regarding refinancing go, the charges themselves are tax-deductible, and your mortgage interest deduction needs to be lowered if your interest rate goes down as a result.

If you are worried about your credit score, this quiz on managing personal finances may help you get on the right track.