What Is The Effect Of Foreclosure On My Credit?

HOW DOES FORECLOSURE AFFECT MY CREDIT?

If you do not make your mortgage payments and you are not provided with any sort of payment plan by your lender, your property is likely going to fall into foreclosure. A foreclosure is when your lender takes possession of your property and sells it at auction for the purpose of recovering the unpaid mortgage balance.

In the event that the sale price the lender receives for the property ends up being less than the amount that you owe, you will be responsible for paying the difference, otherwise known as the deficiency.

The impact of foreclosure on credit
Anyone buying a home should understand the negative impact foreclosure is going to have on their credit. You can expect your credit score to drop around 250 points as a result of a foreclosure. So, if you have a credit score of 700, expect your score to drop to 450. Getting approved for any type of loan or credit will be difficult. It is also possible that you may have difficulties securing a new job as a result of the foreclosure. Learn more about the effects of having bad credit.

How long does a foreclosure affect my credit?
A foreclosure will stay on your credit report for seven years...similarly to all negative items. During these seven years, it is going to be very difficult to get approved for any type of credit or loan. Even if you do achieve approval, interest rates are likely going to be very high. It is important that you attempt to rebuild your credit after you experience a foreclosure. As soon as you begin taking the steps of rebuilding your credit, your rating and score will begin to improve. It will likely take between two to four years for you to be able to get approved for a mortgage or any type of loan after foreclosure. Learn more about rebuilding credit after foreclosure.

The impact of a foreclosure on your credit is significant. Therefore, do what you can to avoid foreclosure and request a loss mitigation plan form your lender so that you can continue to keep your home. Or, if you are unable to keep your home, at the very least your credit will not be as severely impacted.

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