Your credit score is crucial. It allows lenders to gauge your credit at a certain point in time. With a better credit score, you get better rates. One factor that could negatively impact your credit score is a foreclosure.
A foreclosure is considered to be a negative event in your credit history. In addition to losing your home, a foreclosure could downgrade your score. You may be turned down for loans and credit card applications. A lower credit score could also lead to higher rates. In short, it will create quite the impact.
The good news is it is not going to be that way forever since the foreclosure is not going to be in your credit report for all of eternity. But how long does a foreclosure stay on your credit?
It stays in the documentation for seven years. Federal law policy states that foreclosure should be stricken from your credit report after that period. You can send written requests to credit agencies to have such negative items taken out of your credit so it’s crucial that you do routine checks of your report to make sure it does not contain the foreclosure or any other negative item.
The good news is that you do have a way to keep foreclosure out of your credit report. One option would be to look into forbearance, which is when a lender agrees to receive lower monthly payments so you can catch up on late ones, including the interest you owe.
Another option would be redemption, which is when you have a legal right to buy back your home, within a certain period after the foreclosure sale, if you cure the default amount.
The Department of Housing and Urban Development also provides foreclosure counselors so you can access the information you need and get guidance.
While it is a bad turn of events for your property, foreclosure on your credit report will not singlehandedly ruin your credit standing, if you work toward improving your score by meeting credit obligations and exploring legal means to rebuild your credit. The first two years are crucial to how the foreclosure impacts your credit report.
So there is light at the end of the proverbial tunnel. A foreclosure may seem devastating at first, but with the right information, the proper guidance, and a substantially solid plan, you can get over this hump.
