If one is current and has a seasoned loan, will a loan modification hurt one's credit score?

Asked by Rich Hapold, Templeton, CA Mon Mar 23, 2009

I want my son to contact Wells Fargo, to get a loan modification on his $490,000 note which is a 6.5% 30 year fixed.......he's worried that going thru this process shows "financial weakness" and will negatively impact his credit score.

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Edith Karoli…, Agent, Winnetka, IL
Tue Mar 24, 2009
Hi Rich,
There are two different things:

a) Loan modification is needed when the seller is at risk of paying his current loan and in that case hardship has to be shown to the bank - loss of job, high medical expenses something

b) I understand that your son just wants to take advantage of a lower interest rate on his current loan....
that is called a refinance.... He can just talk to his bank or any other to see what the expenses are, and based on his income, his credit score etc. and the expenses involved in the refi and what interest rate the banks will offer him, he can decide whether he wants to go for it.

But these are two different things!

Good luck to both of you, just have your son talk to a lender, Wells Fargo is fine and he can even talk to several or contact a mortgage broker who can check on various bank rates for him.

Edith YourRealtor4Life!
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Jeff K, Home Buyer, Bristol, PA
Mon Mar 23, 2009
A refinance by itself does not negatively impact his score. I use Wells too - they are great. The rate that they do quote him will naturally be dependent on his current credit score. If he has really good credit then he may well get something in the range of 4.75 - 5%.

People re-finance all the time - it's perfectly normal. His excellent payment history (assuming also with Wells) is a great thing for him.

Just make sure he doesn't start doing something silly - like canceling credit cards that he's had for years - that would hurt his credit. When he speaks with Wells, they'll be able to tell him his credit #s from the 3 majors - not the full report mind you - just the scores.
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Dyanna, , California
Mon Mar 23, 2009
In order to get a loan modification he has to show that he could potentially be at risk for falling behind, whatever his reason may be. So long as he isn't behind on his payments, it will not show up negatively on his credit report and as far as being perceived as having "financial weakness" that isn't even a factor. No one knows he asked for a loan modification, it isn't something public.

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Dallas Texas, Agent, Dallas, TN
Mon Mar 23, 2009
No if he is current on all of his payments.


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