The Impact Foreclosure Can Have On Your Credit Score
If you are in foreclosure you may be concerned about the impact it has on your credit score. It is a question that I hear a lot, when some is worried about foreclosure. First one must comprehend that the method of calculating a credit score is proprietary data. Your credit score number is updated every time a creditor pulls your credit. So if there is something lingering from your past it may not have altered your credit score, until there was an inquiry for the latest data about your credit.
How Soon Does Foreclosure Affect Credit
In most cases it can be anywhere between 30 and 90 days from your first late payment. This can rely upon on your lender; when they file with the credit report agencies and what state you live in.
Will A Short Sale Or Deed In Lieu get rid of the affect of the foreclosure on ones credit?
No it will not be gotten rid of by a short sale or deed in lieu of foreclosure. In rare cases the homeowner may be able to negotiate that it be removed from the credit, but this does not happen very frequently.
Most people are shocked at how fast their credit score is lowered. A model of this can be someone who has a score of 700, but is thirty days late on a mortgage payment, and it immedeiately drops their score to 620. Also most people that are missing mortgage payments are not paying other bills on time; meaning late payments, collections or even judgments are all reducing the score. So in just a few short months you can see a credit score of 700 lower down to 460.
The real difficult situation is that most homeowners should be worried with this, because it effects the interest the creditors will give you in the future. Because of such a low credit score, you'll end up paying two or three times as much for items such as cars or items purchased on credit cards, because of higher interest rates. This makes it virtually impossible to pay off your debt in a reasonable amount of time.
The actual score impact of foreclosure for a homeowners credit report is about 175 points. The biggest impact though is the combination between the foreclosure and late payments on other bills, you can see the score altered by 240-260 points.
Not all is lost though; many of the items altering the credit report can be discarded over time. It will require tenacity, but with time and effort you may be able to eliminate most of the damaging items on your credit. Make sure you get a copy of your credit report and look over it; usually people find several items on the report to be incorrect. These can be easily removed with an inquest and showing a paid invoice.
Over time the affect that the foreclosure had on the credit report will slip away. Just because you were in foreclosure, doesn’t mean you can’t borrow a loan to buy a house in the future. You very well can and may want to after you credit score is cleaned up a bit. You may have to come up with a higher down payment and you'll pay a higher interest rate, but it's never impossible.
Nick writes for the ForeclosureFish website and blog, which provide foreclosure help and information to homeowners attempting to hold onto their properties. The site describes numerous methods to avoid foreclosure, including deed in lieu, loan modification, defending a home in court, and many others. Visit the site today to read more about stopping foreclosure while there is still time: www.foreclosurefish.com
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