How Does Foreclosure Affect My Credit?
Many people facing foreclosure find themselves asking “how does foreclosure affect my credit”? Foreclosure will impact your credit but how it will affect you varies. Late mortgage payments, short sales and even deeds in lieu can negatively affect your credit score and ability to purchase future homes.
The damage done to credit is never permanent though so if you are facing foreclosure your score can recover and bounce back. With hard work and dedication, you can rebuild your credit to even higher then it was pre-foreclosure. Read on to learn how these things can affect your credit and what you can do to get your credit score climbing again!
Foreclosure
Foreclosure is a process in which a homeowner falls behind on their mortgage payments and the lender goes through the legal process to evict and collect the past dues. Foreclosure in Florida is judicial meaning that the lender, which in this proceeding they would be considered the plaintiff, must file a complaint with the court against the borrower, the defendant.
How Does Foreclosure Affect My Credit?
When you are facing foreclosure understanding the negative effects that it can bring can help make sure you are in the best position to avoid or even stop foreclosure altogether.
- Foreclosure: If you have gone through foreclosure your credit score may have taken a hit as high as 200 to 300 points. That can bring even the best credit to fair or even poor! This also entails a burden that can follow you to whatever you do. If you are looking for a new job your employer may use your credit score to gauge your sense of responsibility. Want to buy or rent a new home? Many rental companies and individuals use the credit score also as a way to evaluate prospective buyers and tenants and a foreclosure can almost guarantee denial as it shows you were not able to handle on-time payments. Though that doesn’t mean there isn’t anything you can do to make it better. By keeping all other financial obligations in check, the negative effects will diminish over time and in some cases can be within as little as two years. On time payments, and low credit balances will all help.
- Short Sales/Deeds in Lieu: Using a FICO study in the United States the study showed that the impact of short sales and deeds in lieu were just on par with foreclosures. That means that these also show that an individual experienced a loan default and was facing foreclosure. Because of this some lenders may still choose not to do business with you and can still have the same negative perception as a foreclosure. Fortunately, not all lenders think the same and others may see a short sale as a more favorable option over an actual foreclosure.
- Late Payments: Being late on your mortgage payments reflect a homeowner’s ability to pay and even one late payment can significantly hurt your credit score. Talking with your lender on a plan of action if you know you may be late on your payment can help you save the negative hit against your score and find an alternative solution.
Foreclosure is never fun and the impacts it has can be detrimental. Even a short sale or deeds in lieu can still negatively affect your score and follow you for years. Taking the time to correct and fix any issues with your credit and staying on top of your financial responsibilities will help you build your credit score back up! If you are facing foreclosure learning your options is your best defense. Reach out and learn what you can do to help your situation.
407Foreclosure Help has been helping families and individuals stop or avoid foreclosure for over ten years. Go here to get in contact with a foreclosure professional today!