Times are tough across the country forcing tens of thousands of people into foreclosure or facing the very real possibility of losing their homes.With so many people in the same boat many are left wondering how foreclosure will affect their credit scores.Restoring credit scores are extremely important as soon as possible for so many Americans in order to acquire a rental home and restore a tinge of normalcy to their everyday lives.
A credit score is composed of many different factors and a foreclosure will affect everyone’s scores differently.With so many foreclosures taking place recently the three credit bureaus have released data showing how a foreclosure affects a credit score on average.A foreclosure unfortunately isn’t a cut and dry process, there are a multitude of different factors such as how many times a mortgage goes late or if the homeowner has a second mortgage.To further compound the issue, frequently late car and credit card payments usually come along with foreclosure proceedings.
30 day late payment - 40 to 110 point drop
90 day late payment - 70 to 135 point drop
A foreclosure, short sale or deed-in-lieu of foreclosure - 85 to 160 point drop
Remember, it’s hard to say exactly how each credit score will be impacted but it is clear that even the best credit scores will face a substantial drop in score.The important thing to keep in mind is that once a foreclosure, short sale of deed-in-lieu has closed it is time to start over and begin the recovery process and this includes your credit score.This can be a substantial and overwhelming task. There are plenty of trustworthy financial advisors and credit counselors available to help the process get rolling.
Foreclosures ypically remain on a credit report for either 7 or 10 years depending on which state you live in.If evidence of your foreclosure remains on your credit report for any longer than is allowed by the law you have the right to request it to be removed.More often than not the mortgage company of the home that was foreclosed upon won’t rush to remove their derogatory information from your credit report. Be sure to send formal letters to the mortgage company, the servicing company, as well as all three credit bureaus to have this damaging information removed.