How Will Missing Car Payments Affect My Credit Score?
You may want to contact your lender and other creditors as soon as possible. Many companies are doing what they can to lower payments for borrowers and make arrangements to prevent foreclosures, defaults and repossessions. So you may be surprised at how willing they are to help.
As a consumer, it's your responsibility to keep the lines of communication open and initiate the request for help. In the end, it will cost these companies money to proceed with legal action, so it's often better for them to receive any payment right now rather than no payment at all. I have heard from many readers recently who were successful in this approach.
If it does become necessary for you to move, but you are having difficulty selling your house, you may want to consult a short sale specialist. These real estate professionals will market your home at a reduced price, often lower than the amount owed on your mortgage. When a potential buyers makes an acceptable offer on the property, the short sale professional will work with your mortgage lender to try and get the offer accepted (thereby completing the sale and helping you avoid a foreclosure situation).
With this short sale approach, the mortgage account on your credit history might be marked with a "not paid as agreed" statement. This can still hurt your credit score, but usually not as much as a foreclosure.
A home / mortgage foreclosure will have a more serious impact on your credit. It will remain on your credit report for up to 7 years (by law, it has to come off after 7 years). It's possible for your credit to rebound within a year or two of the foreclosure, as long as you pay your other bills on time and avoid any other financial problems.
As for the car payment issue:
A legal judgment will have a negative effect on your credit score, even if you eventually pay off the debt. And like a foreclosure, it will also stay on your credit for up to 7 years from the date the judgment was filed. So it might be worth the effort to reach out to company that owns the car lease to see if you can make some kind of payment arrangement to avoid legal action.
Please understand what we are not offering specific advice on whether you should turn in the car or keep it. For legal reasons, we obviously cannot make that decision for you. But it's worth the effort to avoid having another legal judgment on your credit report (resulting from the missed payments). If I were in your situation, I would try to arrange a payment plan with the lease owner. Something to think about, at any rate.
Hope that helps you some.
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posted by Brandon at
1:40 PM
