If your home enters foreclosure or you enter into bankruptcy, you will damage your credit for the next ten years. Literally, a bankruptcy will remain active on your credit report for a decade. Both actions will automatically drop your credit score by 300 points the minute they are reported to the agency. That will cancel any chance of financially recovering for many years.

When you apply for a loan modification you may see a 20-50 point drop in your score initially. However, after you begin making on time payments of the new mortgage amount, your score will begin to rise again.

A loan modification is perhaps the best way to regain control of a bad financial situation. The program allows you to reduce your mortgage interest rate and payment amount and will bring your mortgage current again.

Using a modification service to apply for the loan program may be beneficial. A credit counselor can assist you in the process, ensuring that you prepare all the paperwork correctly and meet all the deadlines for submitting the work. Working on your behalf, the counselor will make sure that the process runs efficiently from both your and your lenders side. Compliance with the recent changes to the modification process is necessary to be approved for the program.

Your credit score can, and will, recover when you enter into a modification program. In a very short period, once you have reestablished yourself financially, you will be able to qualify for credit. Take advantage of this time period and work toward cleaning up any other poor entries on your report. Cleaning up your report while you make your new mortgage payments on time will boost your score even higher. A modification can be used as a financial advantage if you choose to make it one.