Foreclosure is a legal process used by lenders to recover the unpaid balance of a loan due to the borrower’s inability or unwillingness to pay.
In short, a foreclosure is no joke. Once the foreclosure is possessed it’s time to find somewhere else to stay. However, moving forward isn’t easy. In fact, it can be difficult, even to find a new place to stay.
How Foreclosure Affects Your Credit Score
If you are considering foreclosure and you’re wondering how does a foreclosure affect your credit here’s it.
According to FICO, a foreclosure will lower your credit score by 85 to 105 points if you have a score around 680. Likewise, 140 to 160 points if you have a score around 780. Therefore, the higher your score the greater the impact.
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How Long Foreclosure Stays On Credit Report
A foreclosure stays on your credit report for up to seven years. Of course, this can be removed sooner if there are any inaccuracies with the foreclosure on your credit report.
How A Foreclosure Messing Up Your Credit Can Hinder You in the Future
Whether you’re dealing with a foreclosure or any other debt, your credit will suffer if you don’t make payments on time or at all.
Furthermore, bad credit indicates you don’t make payments on time or at all. Consequently, creditors will be less inclined to approve you for loans.
On the contrary, if you are approved for a loan, the loan interest will be through the roof. Thereby, complicating your financial situation even further.
Another Option Aside From Foreclosure
If you find yourself in a situation where you can’t make your mortgage payments and you’re on the verge of foreclosure consider a short sale.
While a short sale still affects your credit, the impact will not be as bad since now you’re working with the bank to settle the debt.
