For purposes of credit, the effects of performing a loan modification can be both of a positive and negative nature. For some mortgagors, credit can eventually increase with loan modification. The initial result could be negative, lowering your credit rating - it may be reported as a negative settlement or adjustment - but the end result is better than foreclosure. In the long term, a loan modification can help to repair bad credit, particularly if it was already on the path to destruction. In the end, it is important to consider the fact that foreclosure is inevitably negative towards your credit. If there is no other option to prevent foreclosure, the possible credit ramifications of loan modification could be worth it, but it depends on your individual circumstances.