What Does Foreclosure Do To Your Credit?

On the wave of the economic crisis, it is not that surprising to know that foreclosure rates in the United States are higher than ever before.
 

   
There are many homeowners having financial difficulties, consequently, they can no longer pay their monthly home payments on time. Failure to keep up with mortgage payments results in foreclosure. Foreclosure is the case of a person's mortgaged property getting seized, and is possibly the worst financial situation you can be in. When such an unfortunate incident is unavoidable, you would wonder what does foreclosure do to your credit and how bad it would be?

First, once foreclosure occurs it can quickly affect your credit because the statement of foreclosure is usually filed from thirty to ninety days right after a missed payment. The specific amount of time that this statement would be filed varies on the location of the home; however, it will never exceed three months. What does foreclosure do to your credit is that it significantly and immediately affects your overall rating and credit score; consequently, lenders will be much more wary of granting you any credit. In addition, such an incident will deduct a large amount of points from your credit score. The exact number of points is not known, but it is estimated to be from one hundred twenty-five to one hundred seventy-five. Such an amount could easily bring your credit score to crucially low levels. If you have been missing your mortgage and utility bills altogether, related agencies can easily deduct substantial amounts from your credit score.

Another big question that many people ask aside from what does foreclosure do to your credit is, how long does a foreclosure stay on your credit and what happens after. It is a fact that foreclosures can wreak havoc on your life; moreover, it is at par with bankruptcy in terms of being one of the worst things that can appear on one's credit score. The answer to the question, how long does a foreclosure stay on your credit report, is seven years, give or take. However, some argue that since it is a public record, it could stick around for twenty years.

What does foreclosure do to your credit aside from the significant reduction of points from your credit score, is that it brings many people in the brink of despair thinking that they can never recover from their financial bind. Foreclosure puts a mark on one's credit report for the next seven years, and during the first two years, you would not be able to obtain any kind of financing. Ideally, it is during this time that you should start rebuilding your credit rating. There are three easy ways to rebuild your rating: first, budget your entire monthly expenses; second, pay all your other debts on time; and third, apply for an affordable credit card that can also help rebuild your score. If all else fails, get rid of credit to avoid going on debt. Live within your means and use cash for your purchases as much as possible. In general, if you don't want to find yourself asking the question, "what does foreclosure do to your credit?," you should practice prudence in your expenses.


  

Source: Credit Cards For People With Bad Credit Rating


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