Credit Reporting With WaMu Mortgage Repayment Plan

Reader Question:

Last June we fell behind on our mortgage and created a repayment plan with WaMu [which is now part of JPMorgan Chase]. We made our regular scheduled payment along with repayment for 3 months on time. I pulled a credit report and found that for those 3 months WaMu was still showing us 30 days behind and called them about it. They said that was the way they had to report it even though I had made timely payments. I quickly gathered the outstanding balance and paid it the following day to stop being reported as late.

Can they do this? Report late payments on while on a repayment plan? It is now hurting on trying to get a new loan on a new house. I am calling them tomorrow to again request an adjustment in the reporting. Please help I need some ammunition in helping me in my case with them.

Our Response:

Unfortunately, I can't give you much ammunition in this scenario. If you are behind on payments, then you are behind on payments. As such, WaMu / Chase can report you as being late -- even though you're on a repayment plan. If they didn't report this kind of thing, it would encourage people to slide on their payments and pursue repayment plans when they fell behind, without any fear of repercussions.

They also do it to "inform" other lenders about your past financial habits -- which is exactly what a lender wants to know when you apply for a loan. You might call it banks looking out for banks.

An event like this creates a negative entry on your credit reports (as you know), and it can stay on your reports for up to seven years. Even if the status of the entry changes to reflect your full payment, the entry itself can remain for up to seven years.

This is how the reporting system works. It's designed to protect lenders and creditors -- not consumers. It is designed to show everything you've done in the past, from a credit and finance standpoint. Even if you make good on your past mistakes, those mistakes will be captured and reported accordingly.