Foreclosure Credit Damage - How Does Foreclosure Affect Credit?
When a homeowner hasn't made their monthly mortgage payments for 3 months or more, their lender will usually start the foreclosure process. There can be many reasons why they haven’t been able to pay their mortgage payments such as: loss of job, spouse’s death, medical issues, etc; however the outcome is always the same, Foreclosure! What many homeowners do not realize is the foreclosure credit consequences they will face.
Your credit score is a very important factor in your financial life. You need credit to buy a home or car, rent an apartment, get a loan, and even to get a new job! In today’s housing crisis more and more homeowners cannot afford to pay their monthly mortgage payments and are going into foreclosure. A foreclosure can ruin your credit score lowering it as much as 300 points!
3 Ways A Foreclosure Can Impact Your Credit Score:
1. A foreclosure can stay on your credit score for up to seven years and the effects of foreclosure credit consequences can last many years after. It’s important for homeowners to understand how difficult it is to recover your credit score after a foreclosure.
2. Lenders cannot offer you financing for 24 months following a foreclosure. This means you cannot get a personal loan, car, new home, credit cards, and even utilities such as cable are dependant on your credit score. In addition it will be next to impossible to be approved for another mortgage loan for at least 3-5 years depending on the situation.
3. Your credit score will instantly decrease 200-300 points once a foreclosure appears on your credit report. Even someone with a good credit score such as a 700 will be drastically affected by a foreclosure after their score lowers to around 400...
As you can see foreclosure should almost always be a homeowner’s last option to avoid the foreclosure credit consequences that so many homeowners have learned to late. There are many foreclosure alternatives available to homeowners such as: Deed in lieu of foreclosure, a short sale or “short pay-off”, and a loan modification. If you are in or facing foreclosure, now is the time to act and do something to save your home and credit score...
