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What Happened to My Credit Score? How to Handle Credit Mistakes

Your FICO credit score: It really sticks with you, doesn’t it?

And that can be a good thing. For those who develop healthy spending habits, a good credit score can provide lifelong benefits like low interest rates and greater access to credit.

But what about those with a credit slip or two? Don’t panic. With time and better fiscal management, even the biggest credit slips can be buffed away. Let’s look at the credit effects of late mortgage payments, foreclosure, short sales or bankruptcy, and explore the best way to handle these credit slips.

Credit Slip #1: Late Mortgage Payments

A mortgage is a serious obligation. Should it not be a serious enough obligation for you and your payments start rolling in late, you might have a credit problem. A 2011 FICO study found that late mortgage payments can take the following toll on the average consumer:

Time Period Consumer A Consumer B Consumer C
Starting FICO Score ~680 ~720 ~780
FICO Score after 30 days late on mortgage 600-620 630-650 670-690
FICO Score after 90 days late on mortgage 600-620 610-630 650-670

If your mortgage payment arrives a day or two late, there’s generally no need to panic. “The first thing to note is that most lenders do not report missed payments until the account is 30+ days past due,” said Anthony Sprauve, director of public relations for in a recent article.

But once that payment is 30 days late, most lenders will notify the credit reporting bureaus. And according to FICO’s 2011 study, a 30-day late mortgage payment could shave 60-110 points off your score. A 90-day late payment can sap 60-130 points from your score.

While the FICO study only specifically mentioned late mortgage payments, you can be fairly sure that late credit card or installation loan payments will also affect your credit score. So to keep your credit score soaring (or to bounce back from a history of late payments), do your best to make all payments on time.

Credit Slip #2: Short Sale or Foreclosure

Both short sales and foreclosures can send FICO scores tumbling. Take a look at the impact of short sales and foreclosures on an average consumer’s FICO score:

Time Period Consumer A Consumer B Consumer C
Starting FICO Score ~680 ~720 ~780
FICO Score after short sale / deed-in-lieu / settlement (no deficiency balance) 610-630 605-625 655-675
FICO Score after short sale (WITH deficiency balance) or foreclosure 575-595 570-590 620-640

Note that a short sale isn’t always the “credit saver” it’s sometimes rumored to be. A short sale with a deficiency balance can take the exact same hit on a consumer’s credit score as a full foreclosure, according to the FICO study.

But while foreclosures and short sales result in serious damage to a consumer’s credit, that damage doesn’t have to be permanent. Should you commit to strong credit health, it’s possible to obtain a VA loan within two years of the foreclosure or short sale settlement date.

Note that we said “possible.” The ball is in your court. Improve your fiscal habits and your credit (and odds of obtaining a new VA loan) will also improve.

Credit Slip #3: Bankruptcy

That ugly “B” word. No other single event takes a bigger swing at your credit score than bankruptcy:

Time Period Consumer A Consumer B Consumer C
Starting FICO Score ~680 ~720 ~780
FICO Score after bankruptcy 530-550 525-545 540-560

The good news for VA buyers is that it’s technically possible to obtain a VA loan within 12 months of a Chapter 13 bankruptcy and two years of a Chapter 7 bankruptcy. Again, note use of the word “possible.” To bolster credit scores within the range of VA loan approval (VA lender Veterans United typically employs a 640 FICO minimum), consumers need to be extremely proactive and strengthen every aspect of their financial profiles.

How? Read on.

Boost Credit with These Tips

No matter what your starting point, you can strengthen your FICO score with a focus on these tips:

  • Avoid late payments. Just do it.
  • Leave a good paper trail. If you pay your credit card balance in full every month, use your card to pay your monthly bills. Create a stellar paper trail for lenders to consider.
  • Know your limits. Don’t max out all of your credit cards. Try to keep balances below 50 percent of the maximum.
  • Scour your credit report. Get a copy of your credit report annually. Comb the report for errors, and dispute those errors diligently.

The good news for those with poor credit: Credit changes constantly. With hard work and focus, a formerly embarrassing credit report can be polished into a glowing recommendation.

So what are you waiting for? Start polishing today!

Need Help?

Active-duty service members and veterans have access to free credit consulting through the Veterans United Lighthouse Program. Reach out to a Lighthouse credit consultant by calling 888-392-7421 or visiting