The Impact Of Losing Your Home To Foreclosure

By Author: Nick Adama
Total Articles: 197
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If you are looking at foreclosure you may be concerned about the blow it has on your credit score. It is a question that I hear a lot, when some is concerned about foreclosure. First one must be aware that the method of calculating a credit score is proprietary info. 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 info 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 erased by a short sale or deed in lieu of foreclosure. In rare cases the homeowner may be able to discuss that it be removed from the credit, but this does not happen very much.

Most people are shocked at how fast their credit score is dropped. A good ...
... instance 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 lowering the score. So in just a couple months you can see a credit score of 700 drop down to 460.

The real crunch is that most homeowners should be concerned 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 around 175 points. The biggest blow 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 taken away over time. It will require stamina, but with time and effort you may be able to eliminate a lot of the damaging items on your credit. Make sure you get a copy of your credit report and look over it; usually people find many items on the report to be incorrect. These can be easily removed with an inquest and proving a paid invoice.

Over time the affect that the foreclosure had on the credit report will fade away. Just because you were in foreclosure, doesn't mean you can't 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 publishes daily articles on the ForeclosureFish website, which aims to educate homeowners on how they can stop foreclosure while they still have time and options available. Visit the site today to learn more about preventing the loss of a home and recovering from a financial crisis, and download an e-book explaining the basics of the foreclosure process: http://www.foreclosurefish.net