How Foreclosure Impacts Credit Scores and Ways to Start Rebuilding

How Foreclosure Impacts Credit Scores and Ways to Start Rebuilding

  • Wendy Dickson
  • 04/13/22
Foreclosure can happen after you’ve missed mortgage payments and your lender takes ownership of your home. Facing a home foreclosure can be a scary and uncertain time. If you’ve been affected by COVID-19, you may be eligible for financial support from government programs. And if you’ve been through a foreclosure, you might be wondering about its impact on your credit scores. Good news: It doesn’t last forever, and you can start rebuilding credit scores from foreclosure over time.

How Foreclosure Affects Your Credit

It’s hard to say the exact impact of foreclosure on your credit scores can depend on several factors. These include which credit reporting agency provided the information and which credit-scoring model was used in the calculation. A foreclosure might appear on your credit reports, as well as the missed payments that led to it. Credit-scoring companies use the information from your credit reports to calculate your credit scores. And payment history is an important factor in calculating your credit scores from your local bureau. As a general guide, missing three or four mortgage payments by itself can decrease your credit scores by at least 100 points. And foreclosure could take your scores lower. Foreclosure can stay on your credit report for several years and it is measured from the date of the first missed payment that led to the foreclosure.

Ways to Start Rebuilding Credit Scores From Foreclosure

Fortunately, the impact on your credit scores doesn’t have to last forever. Rebuilding your credit scores will take time and consistent responsible credit use, but you can start straight away. Here are some ideas on how:

1. Catch Up on Overdue Bills

If you’ve struggled with making mortgage payments and paying other bills on time, you’re certainly not alone. A survey by the CFPB found that in May 2019, more than 40% of Americans had a hard time paying a bill or expense in the previous year. In many cases, the difficulty involved mortgage payments.

2. Start With a Secured Credit Card

If your financial situation permits, a secured credit card can be a good tool for rebuilding credit. As with any credit card, getting approved for a secured card isn’t guaranteed. Aside from a security deposit, there may be additional approval requirements.

3. Seek Help From a Professional

If you’re unsure how to get your finances back on track after a foreclosure, you can get help from a professional credit counselor. A credit counselor offers a range of services including debt management and budget counseling.

Recovering From Foreclosure

A foreclosure should fall off your credit reports after seven years. But if that doesn’t happen for some reason, you can file a dispute with the credit bureaus to request that the foreclosure be taken off your credit report. Bouncing back from foreclosure is doable given time and responsible future credit use. But be patient. Recovery takes time.
Avoiding foreclosure is always the best thing to do when facing these uncertainties. Act quickly by allowing real estate agents to find foreclosure solutions for you! If you need to know more info on rebuilding credit scores from foreclosure, talk to us – CPD Homes, LLC! We are buying houses in Cleveland, and have been helping families and homeowners since 2012. We’ve been working with home sellers dealing with – inherited properties, divorce, behind on the mortgage, major repairs needed, sudden move, or for whatever reasons why homeowners sell their homes, CPD Homes is here to help. We buy houses in any condition and in all price ranges! So call us today to discuss your property at (216) 619-4387 – or click here to drop in your information and we will get back to you with a CASH offer! We are here to assist you.

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