FORECLOSURE AND YOUR CREDIT SCORE
Posted on 05 30,2015
Your foreclosure can have an immediate effect on your credit score and your ability to obtain another mortgage for a certain amount of time. Your (FICO) credit score is usually the first things a potential lender will look at when applying for a loan.
Foreclosures lower your credit score quickly and significantly, keeping you from obtaining a favorable interest rate on any form of credit. Your foreclosure will remain on your credit report for seven years but the negative impact it will have on your FICO score will decrease over time. Staying current on all other debt payments will help in this regard.
A year or so after your foreclosure, if certain criteria or met and you maintain a satisfactory credit report during this time, you may be able to obtain a new mortgage. On the other hand, in some cases it can take up to seven years before another mortgage may be attainable. In general, however, it is difficult to know just how a foreclosure will affect your ability to obtain credit.
ALTERNATIVES TO FORECLOSURE
As opposed to foreclosures, short sales are when a home is sold for less than the total debt left on the mortgage. Likewise, deeds in lieu of foreclosure takes place when a lender agrees to accept a deed to a property rather than foreclosing and obtaining the title to the property.
While these two options may have certain benefits, they may not be much better than a foreclosure when it comes to your credit score, and creditors perceive them as only marginally better. You may be forced to wait just as long after a short sale or deed in lieu of foreclosure to obtain new lines of credit—up to seven years in some cases.
A much better alternative is a loan modification which has a considerably smaller impact on your credit score. If you are late on your payments, however, the lender can report this to the credit reporting agency
If you need help with a foreclosure or other means of saving your home, speak with The David McCormick Law Group for legal advice.