Credit reporting on late mortgage payments can sometimes be something of an intimidating subject for homeowners. Especially if they’re unable to make their payments on or before the due date. But in reality the details are very simple, and most borrowers don’t have anything to worry about.
Payment Due Date
In a residential home loan the due date is most commonly the first of the month. Payments made before the due date are always welcome, but not expected. After the due date the payment is technically considered late if it has not been received, but there are no adverse consequences to the homeowner until after the end of the grace period.
Late Charge Date
The grace period on a residential home loan is typically 15 calendar days, though it could be less. That means the borrower will usually have 15 additional days after the due date to make their payment before a late fee is charged. For example, if the payment is due on the first of the month, the grace period will extend through the end of the day on the 16th. After that day, if a payment is not received, the servicer will charge a late fee to the account. If the last day of the grace period falls on a weekend or holiday the servicer will always extend that grace period through the next business day.
The next threshold to watch is the end of the month. This is often referred to by servicers as the delinquency date. If 30 days have passed and no payment is applied, the loan will be considered delinquent. It is after this point that derogatory credit reporting will occur.
Mortgage servicers will only report a loan as current, or as delinquent in increments of 30 days (30, 60, 90+). They may also add modifiers to those reports identifying that a loan is on some kind of a workout plan, in bankruptcy, in foreclosure, and so on. If a payment is paid after the end of the grace period but before the end of the month, their credit report will still show that they were current.
While credit reporting does not occur until after the end of the month, a servicer may start making calls about a past due payment as early as the third day of the month. Typically these calls are prioritized based on past payment activity. So if a borrower has a history of making payments late, or at different times each month, they are more likely to get a call than someone who regularly makes their payments at the same time before the end of the grace period.
If a late payment is reported on a borrower’s credit in error it is the servicers responsibility to submit a correction to the credit bureaus in a timely manner. But please note that there may be a delay of up to 30 days before the corrections reflect in a borrower’s credit report.