* Loan modifications stave off foreclosure, but damage credit.
* Modification causes credit score damage that lasts for long time.
* On-time payments can help reverse credit score damage.
Mortgage loan modification and credit scores
Homeowners struggling to make their house payments may seek a mortgage loan modification in hopes of avoiding foreclosure and protecting their credit score. However, loan modifications also take a toll on those scores.
In theory, a loan modification should be a mutually acceptable solution to an out-of-control mortgage debt. The homeowner gets a workable payment schedule and the lender gets at least some of its loan repaid.
In practice, it’s not that simple.
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