The Impact of Foreclosure on Your Credit
The impact of foreclosure on your credit can mar your credit report for seven years from the date of your first missed payment. According to U.S. News, “During that time, it can affect your credit score and the way other lenders view your creditworthiness in the future.”
The Impact of Foreclosure on Your Credit
Financial Samurai tells us, “if your FICO credit score is 680, a foreclosure will drop your credit score on average by 85 to 105 points. If your credit score is excellent at 780, a foreclosure will drop your score by 140 to 160 points. In other words, the higher your credit score, the more it will get smashed!.
What are FICO credit scores?
Caroline Mayer, a consumer blogger, says, “It’s an algorithm designed to predict your likelihood of repaying debt. Lenders use your score to determine whether to approve you for loans and credit cards and at what interest rates. Insurers use credit scores to set premium rates, and employers use them when making hiring decisions.
FICO credit scores run from 300, considered the highest risk of default, to 850, the lowest risk. Though FHA for years has accepted applicants who have FICO scores in the 500s, the practical reality has been that most lenders ignore borrowers whose scores are under 620 or even 640.
How are FICO credit scores calculated? Your score is based on many different pieces of credit data in your credit report. This data is grouped into five categories, as outlined below. The percentages in the chart (above) reflect how important each of the categories is in determining how your FICO Scores are calculated.
If you don’t know your FICO credit score, you can request a free copy of your credit report then check it for errors, such as late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts are correct. If you find errors in any of your reports, dispute them with the credit bureau.
There Are Steps You Can Take to Avoid Foreclosure.
Contact your lender
and level with them. They have seen this before and will demand you take steps to fix it. Steps to take may require you selling your toys and making significant cuts in your spending.Do not ignore your mail
. Many have been in your shoes. The first thing many did when the mail came was throw the bills in a drawer. Those first envelopes will contain helpful suggestions to get your finances under control. Then will come legal action. Ignoring these notices can cause you to lose everything.Know the Process of Foreclosure
: Prior to initiating a foreclosure, the lender must serve a notice of default and notice of sale must be recorded with the register of deeds. Not less than ten (10) days after the recording of the notice of default, a copy must be sent to the borrower, and others such as junior lien holders or those have requested such notification.- A notice of foreclosure sale, which is usually incorporated with the notice of default, must be sent to the borrower and all interested parties 20 days prior to the date of the sale.
- Generally, the notice of sale must be advertised for five (5) consecutive weeks with the last publication at least ten (10) days before the sale but no more than thirty (30) days before the sale.
Contact Professionals
– Your banker may be able to refinance the loan, or your creditors may be able to give you repayment options. Contact a credit counselor. Sure you will feel like a failure or worse, but take responsibility for your actions. Contact a bankruptcy attorney. That sounds contrary to taking responsibility, but you need to know your options so you can make informed decisions.Contact a professional real estate investor
. You may want to sell your home fast to get out of the problem or to save your credit rating. Styl Properties, Inc. is here to help homeowners out of any kind of distressed situation. As investors, we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. We offer the simple honest truth about your home and how we can help you sell it fast to resolve any situation.FREE information on How to sell your house fast
Give us a ring. We would love to help you understand the process and to answer all of your questions. You can reach us at 402 999.0577.