Last time we talked about the availability of money, current lending guidelines and challenges for self employed borrowers. Visit our newsletter archive for this and other past newsletters on www.cwcfinancial.com.

In this newsletter , we are going to provide information about the potential impact of loan modifications on credit scores and the subsequent ripple effect.

What most people do not realize is that when a lender modifies a loan, that lender reports the loan modification to the credit bureaus and, due to the way the credit scores are calculated, the scores could drop dramatically.

Another challenge is that when your credit score drops, your other financing/credit resources can be negatively affected. For example, you could have a credit card with an available limit of $5000 with a $1000 balance. If the credit card provider drops your credit limit to $1000, you will now have a "maxed out" credit card and that will further propel your credit score downwards.

Hopefully, due to the millions of modifications already completed and the millions to come, the credit scoring systems will update their methodology so that credit scores are not impacted in such a negative way.

"Consumers who are considering loan workouts should know the exact terms of their agreements, including whether there is a permanent or temporary reduction in the monthly payments, and be wary of signing a waiver of rights," said Barry Zigas, director of housing policy at the Consumer Federation of America in Washington. "They should always work with nonprofit housing counselors, he said."

"Borrowers should also ask their lenders whether they are obtaining modifications through the government program or the bank’s proprietary program, and how the changes will be reported to the credit bureaus," Zigas said.

It is important to keep things in perspective and to know that a foreclosure is potentially much worse than a loan modification and the ability to remain in one's home could far outweigh the impact on your credit score.

As always, we welcome you to give us a call or drop us a note anytime so that we can analyze your individual situation and advise what strategy might serve your best interest based on the present market.

Sincerely,Your CWC Financial Loan Team

888-711-5454 Toll Free / 415-454-1130 info@cwcfinancial.com