Without question, your credit rating takes a hit if you foreclose on your home. Other negative impacts are late mortgage payments, short sales and deeds in lieu. Are hard economic times causing you to face the reality of one of the noted options? If so, take heart, the damage is not permanent. With time and patience, you can rebuild your credit rating. See the following summary of ways that foreclosure, short sales, deeds in lieu and late mortgage payments affect your credit rating and how you can repair the damage.
Not to worry though if you focus on keeping your financial obligations on the up and up. While your credit report might show a Foreclosure for up to seven years, or as little as two, the effects will slowly dissipate with time with on-time payments and low balances on your credit accounts.
If you are forced to give your home up to foreclosure your credit score can drop by as much as 200-300 points. You can check your credit score on CafeCredit.com as well as find ways to quickly improve your credit.
This drop creates a ripple effect that impacts your ability: To purchase a new home, obtain car loans, credit cards and even insurance. Looking for a new job? Some prospective employers refer to credit scores as an indication of personal responsibility. If employers perceive you as untrustworthy based on your financial history you could be passed over.
Keep focused on maintaining your financial obligations in good standing. Credit report Foreclosure can linger on the report for as long as seven years. A positive but though, its effect will reduce in as little as 2 yrs. Here is the if. If other credit balances are kept low and all payments are made on time.
What About a Short Sale or Deed in Lieu?
A FICO study discerned these fall in the same negative affect as a foreclosure.
Why? Because lenders eyes see them as a bedfellow with other mortgage loan defaults. So there future vision could have them concluding they see evidence you will not be able to pay your debts. A little up side is though that However, a past short sale might be considered less unfavorable than a foreclosure. Yeh, this is going to be unique to each lender.
Late Payments Affect
ven a lone month of late mortgage payments can raise questions about your ability to pay debts. Dropping back to a FICO study again it gives up info that a late mortgage payment, even just by 30 days, causes a noticeable credit score drop.
Get in contact with your lender without delay and get an alternate payment schedule arranged if your looking at a possible missed payment.
Whether a foreclosure, short sale or deed in lieu the impact can be lessened if the current mortgage lender doesn’t notify the credit reporting agencies about a deficiency balance on your loan. When the proceeds from a foreclosure, short sale or deed in lieu is short of paying the unpaid mortgage balance, that amount is the deficiency.
Give it some time and you’ll recover, deficiency on your credit report or not.