Jan
26HAMP May Have Hurt Credit Scores
Tagged Under : Credit, Credit Scores
A government program intended to help combat foreclosures in the country also had the potential to reduce a person’s credit score.
According to a recent report from the New York Times, lenders taking part in the Home Affordable Modification Program (HAMP) used a certain code when reporting the modifications to credit bureaus. At the start of the program, there was no specific code for credit reports available for the modification program.
The code that was being used categorized the modification plans as a partial payment, which has the potential to lower a person’s credit score. However, since November, the Treasury Department has been using a new code that was developed for the modifications.
Even with the new code, unfortunately, a homeowner’s credit score could still potentially be affected in the future, the Times reported.
“That depends on whether FICO, which creates the most popular credit score formulas for credit bureaus like Equifax, Experian and TransUnion, concludes that its appearance in a credit file is somehow predictive of late bill payments or other bad behavior,” the Times story said.
HAMP was first introduced by the government last year to try to help troubled homeowners through trial loan modifications. The goal of the program is to get these people into permanent modifications, which should help them avoid foreclosure on their houses.
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