It is unfortunate and stressful when you have to undergo foreclosure during a time when you are struggling financially. A foreclosure may be listed on your credit history and damage your score for several years after it has occurred. However, there is a light at the end of the tunnel. Foreclosures may harm your credit score, but they do not last forever.
You can find out more information on receiving help with your credit score after you experienced a foreclosure. Choose a team that has your financial wellbeing in mind. Contact My Credit Repair Clinic today for a consultation.
Time of Foreclosures on Credit Report History
A foreclosure may leave negative marks on your credit score to indicate that you’ve experienced financial troubles and could not meet the demands of your mortgage. However, this is a temporary issue as there is a time limit on how long this derogatory remark remains.
How A Foreclosure Affects Your Credit
When a foreclosure transpires, a mortgage lender will repossess your property after you have consistently been unable to pay the loan payments. After the lender seizes the property, they may sell it to cover the portion of the unpaid loan.
This damages your credit score because of the unpaid portion of the loan. A foreclosure can decline your score by 100 points or more. Even if you had an excellent credit score, you might see your points drop by 160 points. After this has occurred, it may take three years of on-schedule payments before your credit score can return to normal.
Lenders will see this on your report and will surmise that you are a dangerous borrower because of what is reflected in your credit history. Some lenders won’t accept you as a borrower if you have experienced foreclosures in the past. Others will ignore the foreclosures when you meet their lending criteria, and the foreclosure is several years old.
Tips To Avoid Foreclosure
When you are aware that you may fall behind on your payments, you should contact your lender as soon as possible. Surprisingly, lenders do not want to foreclose and would rather avoid this negative event. They try to find a simpler approach and would rather not get involved with the complexity of requesting a foreclosure. When you work with your lender, you can explore options to overcome this financial obstacle.
You must communicate and respond to any letters you receive from your lender. Even if you are stressed, you cannot avoid or ignore the issue. The notices hold a lot of pivotal information that you need to learn about your financial situation. There are many foreclosure prevention options available, and often these ideas are mentioned in these letters.
If you do not respond to these letters, the lender may take legal action against you. The letters you don’t respond to can be used against you in court. If one of the notices is a request to appear in court, this can result in an even worse judgment being filed against you if you do not show up.
If you are not reading your mail, this won’t suffice as an excuse, as it will be determined that you are ignoring the lender’s attempt to reach you. Some of the avenues you can take to avoid foreclosure include the following:
- Repayment plans
- Forbearance
- Short sales
- Mortgage modification
- Refinancing
- Deed-in-lieu of foreclosure
You can also take other approaches, which can include budgeting, prioritizing the way you spend, selling your assets, or contacting the US Department of Housing and Urban Development agency. Try to avoid any foreclosure recovery scammers.
Reduce The Credit Score Impact Of A Foreclosure
You have to wait for the foreclosure’s expiration date on your credit report for it to be removed. There is no other way to take it off of your credit history. The foreclosure expires after seven years from the very first loan payment you fell behind on.
It is removed after seven years without you having to take action. If you do not see it removed, you can go through a dispute process for your credit report to have the errors erased or corrected. This also works for those who have foreclosures on their credit report, which never even occurred.
Start Rebuilding Your Credit Now
To improve your credit score, you have to begin taking good credit habits to rehabilitate your borrowing history. This will help you get approved for other important loans, such as those for automobiles, high-limit credit cards, and another mortgage.
Improving your credit going forward is the best way to enhance your score. The most important way to do this is to continue to make on-time payments for any of your scheduled bills or loans. You also should pay for any missed payments as well.
Another approach is to reduce your credit utilization ratio. This means that you shouldn’t use most of your credit cards and leave some of your credit unused. Too much credit being used means that you have a high ratio of debt on your credit cards. You can keep old credit accounts rather than new ones, as this also improves your score.
Additionally, when you lessen the number of hard inquiries on your credit, it shows that you have no recent applications for new credit. Try to pay down on your old accounts and avoid opening new ones if you can. When you have a mixture of credit accounts, this will also help because it shows that you are very dependable with different types of credit accounts and loans.
Learn How You Can Recover From Foreclosure
If you are still struggling with your mortgage payments, help is on the way. Work with a very knowledgeable team who can help you recover the correct way. Reach out to My Credit Repair Clinic for more information.