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What Is the Impact of Foreclosure On Your Credit-Worthiness?

How a foreclosure affects your credit historymay vary based on your specific circumstances and how you manage your credit following the foreclosure. The foreclosure typically stays on your credit report for up to seven years from the date filed.

What Is the Impact of Foreclosure on My Credit Score?

A foreclosure may cause your credit score to drop over 200 points. The exact figure will vary based on your other credit history. This drop may make it difficult to obtain any loans or credit right after the foreclosure. However, if you continue to pay your other accounts and debts in a timely fashion, you may not have to wait a full seven years to successfully apply for a new mortgage or installment loan.

Can I Apply for Credit Following a Foreclosure?

There are many factors for the creditor to consider during the application process. Many mortgage companies won't approve a new mortgage for you for at least two years following a foreclosure but that is not a hard and fast rule. If you have a hefty down payment and a high debt-to-income ratio, you may be more likely to get an underwriter approval.

It will be difficult in the short term to boost your credit score once a foreclosure appears in your recent credit history, but there are steps you can take. Lenders use a risk-based analysis to determine if you are credit-worthy. You can make regular payments to the lender for the foreclosed home and pay off other outstanding debts on your credit report. Start this process as soon as possible to minimize the impact of foreclosure.

A Sign of the Times: Foreclosure

After Seven Years...

Once you reach the seven-year anniversary of your foreclosure sheriff sale, make sure to check your credit report. The law generally requires credit reporting bureaus to remove the foreclosure from your record after seven years. Having this removed may not have an immediate impact on your credit score but it will no longer play a factor in the underwriting process.

Now that you know about the impact of foreclosure, get your Credit Report and Score.
How to Avoid Foreclosure
How Do I Get Out of Debt?
What Affects Your Credit Score?

This information is for educational purposes only and does not constitute legal or financial advice. You should always seek the advice of a legal or financial professional before making legal or financial decisions.

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