I think we can all agree… economically speaking, this is a tough time. Unemployment soars across the country and many are beyond tightening our belts, financially speaking. Many people find themselves facing foreclosure, about to lose their homes.
Whether it’s from the horrible economy, job loss or even divorce, foreclosure is a hard truth for many folks. They do what they can to exhaust their options to avoid this. The option of a short sale may become very appealing for a time (until it became painfully clear that no one wants your old, mid-remodel house with exposed drywall in many rooms).
So, now the big question many folks face is: “What is this foreclosure going to do to my credit score?”
Sadly, it seems you can begin to feel the hit after your first missed payment, even though your mortgage holder may not say a word until the second payment is missed. If non-payment continues, the lender will file a “Notice of Default” within 90 days to a year from the initial missed payment.
While we may want to play ostrich and bury our heads in the sand rather than acknowledge the situation, it seems to be the general consensus that we should always keep open communication with our lenders. Swallow our pride, come clean, and look at the possible options. Many lenders will offer solutions to those willing and wanting to keep their home and remain in good standing with the institution.
However, when we realize we cannot or do not wish to keep the house that is now crushing our financial worthiness, there may be the option to negotiate with our lender and arrange a short sale or a deed in lieu of foreclosure before finally accepting the inevitable credit catastrophe.
It has been reported that a foreclosure can drop one’s credit score by 250 points and can take up to seven years to come back from such a blow.
However, once past the point of no return, we must take a long hard look at the mess we’ve made, re-evaluate, and come up with a plan to rebuild. So, now is the time we have to make a budget, ensure bills are paid on time, and secure a credit card aimed at rebuilding credit. It is best to use this card for small expenditures and pay the balance in full each month.
The future is dark after foreclosure, but it doesn’t have to mean doom. It just means you’ve got to work hard to rebuild your credit.