Tips To Avoid Foreclosure
While your credit can and will recover after a foreclosure, the best response to foreclosure is to prevent it altogether.
Here are some tips to avoid the painful process in the first place:
- Be proactive with your lender. Before you miss your first mortgage payment , reach out to your lender and let them know you’re having difficulty. They may offer you some options to help you work through a short-term loss of income or buy you time to sell your home. Depending on the nature of the property and how many payments you’ve already made on the loan, they may also offer to renegotiate a longer repayment term with lower monthly payments.
- Respond to communications from your lender. When debt starts to feel overwhelming, it’s common for borrowers to let notices from lenders pile up in the form of unanswered voicemails and unopened mail. That’s the worst possible response. Lenders don’t want to be in the foreclosure business, but they can’t work with you if you don’t respond when they reach out. The conversations won’t be fun, but they’re better than losing your home.
- Use the U.S. Department of Housing and Urban Development as a resource. HUD has a variety of helpful tips and strategies and offers access to counselors who can help you work out a plan for avoiding foreclosure.
Foreclosure is something no oneneither borrower nor lenderever wants to go through. It’s best avoided altogether, but if you can’t get around it, you and your credit should eventually recover.
Is It Possible To Remove A Foreclosure From A Credit Report
A credit bureau should automatically remove a foreclosure from your credit report on its own once the seven-year credit reporting clock expires. But there are a few circumstances under which you might be able to remove a foreclosure from your report earlier than expected.;
In the situations above, you could dispute the foreclosure with the credit reporting agencies, either on your own or with the help of a credit repair professional. If the lender doesnt verify the foreclosure as accurate, the credit reporting agencies should delete it from your report.;
Will My Credit Score Go Up When My Foreclosure Falls Off
Your credit score should go up when the foreclosure falls off your credit report after the seven-year period. However, how much your score recovers will depend on any other negative items that are active on your report.;
Also keep in mind that the foreclosure will affect your score less and less as time passes. While it’s never a good thing to have a foreclosure on your credit report, its impact will lessen over time especially if you take steps to rebuild your credit while you wait for the foreclosure to drop off.;
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How Long Does A House Foreclosure Stay On Your Credit Record
If you have received a notice of default in the mail, you may wonder about its ramifications, such as how long a foreclosure will stay on your credit record. You will receive this default notice between 60 to 90 days after you have fallen behind on your mortgage payments. This is serious, because foreclosures can have a damaging effect on your life and may result in you losing your home. For homeowners who do go through foreclosure, another serious effect is on a homeowner’s credit report, in which that homeowner’s credit score takes a big hit and a documented foreclosure can haunt a foreclosed homeowner for years.
Where Do I Start
Start by gathering information and learning everything you can. This is a challenging battle, and youll need to be prepared. Dont forget to include that ugly stack of papers from the mortgage servicer.
There are three credit reporting agencies:
Take advantage of one of the very few free things in life: your credit report from each every 12 months. Request them all at Annual Credit Reports website.
If youve already received a report from one or more agencies in the past 12 months, you could be entitled to another. Or, if youve recently been turned down for an application for credit, youll get a letter in the mail describing how you can get another free credit report.
Finally, if youve received notification your personal information has been jeopardized, you can get another free report.
The score on each report will be a little different . If one is very different, see if you can spot an error. Checking each report is important for your financial health.
Ask for Help
Sometimes credit reports can be long and confusing, especially for those of us who have led varied and interesting lives. There are people who can help with that. A strong, long-lived can be invaluable.
A reputable company will be able to help interpret your credit report, spot inconsistencies, and dispute negative marks. They challenge creditors and credit agencies every day. Their tools are fast and effective.
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Is It Possible To Have A Foreclosure Removed From A Credit Report
Yes, it is possible. There are several reasons why a foreclosure could be removed from your report.
- The foreclosure is over seven years old. Experian states a foreclosure can be removed after seven years from the original delinquency date.
- The lender is no longer in business.
- The servicer provided inaccurate information on the foreclosure.
- There was a voluntary dismissal.
Do Servicers Follow The Rules
In my experience, the letter of the rule is followed, but the spirit of the rule isnt always honored.
A few years ago, my husband and I were going through the foreclosure process. After researching our options, we applied for a loan modification. The servicer approved our modification after several weeks of nail-biting, and we received another ugly pile of paperwork a few days later.
I finally worked up the courage to read through the modification contract. It was riddled with red post-it flags screaming sign here, and initial. Part of me just wanted to sign it and close that very dark chapter of my life.
Im glad I didnt. Buried several pages into the document, in tiny font, there was an interesting statement. The servicer could start foreclosure immediately if we were even one day late paying our mortgage.
. What? This contract would completely replace the original mortgage contract.
For the life of our 30-year mortgage, if one payment was a single day late, the servicer could have started the foreclosure process. Think about that. How many people just signed here and initialed there without even looking?
Quick Tips For Rebuilding Your Credit
Just because a foreclosure stays on your credit report for seven years doesn’t mean you can’t start rebuilding your credit now. Here are five strategies for improving your credit score while you wait for a foreclosure to drop off your report.;
Pay your bills on time – Your payment history makes up 35 percent of your credit score, making it the most important factor in your score. Make sure you pay all your creditors on time every month so you don’t accumulate any late payments on your credit report.
Become an authorized user – You can piggyback on someone else’s good credit by becoming an on their credit card account. Just make sure the creditor reports authorized user activity to the credit bureaus.;
Pay off debt – Paying off debt will improve your ratio, which accounts for 30 percent of your credit score. You should try to keep your ratio as low as possible and by no means higher than 30 percent.
Open a secured credit card – A foreclosure can lower your credit score considerably, making it hard to qualify for a regular credit card. Fortunately, you can probably still qualify for a secured card, which you can use to build a positive payment history.
Take out a credit builder loan – With a , you pay into a kind of savings account and then receive the “loan” money at the end. This gives you an opportunity to establish a positive payment history, which can boost your credit score.;
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Experienced Foreclosure Defense Attorneys Representing Clients In Pasco & Hernando Counties
If youre in the midst of foreclosure proceedings and youre unsure what to do next, you can turn to the foreclosure defense attorneys at The Lyons Law Group, P.A. Weve been serving clients across Tampa Bay since 2008, and we can provide you with valuable information about how to avoid a foreclosure and save your house, whether that involves negotiating a loan remodification, entering into a forbearance agreement, committing to a repayment plan, or pursuing another strategy.
We offer free initial consultations and wed love the opportunity to talk with you, provide you with additional foreclosure information, and discuss your legal options for how to move forward. Contact us today to schedule an appointment on the phone or at either of our offices in New Port Richey and Spring Hill, Florida.
Foreclosures And Your Credit
Foreclosure is usually second only to bankruptcy as the event that does the most damage to your credit scores:
First, on your credit reports, as with a short sale, the account will often be flagged as not paid as agreed.
Second, while a foreclosure stays on your credit reports for seven years, that doesn’t mean your credit scores are completely ruined. While your scores may drop, you can mitigate the damage by ensuring that all other aspects of your financial life are in good shape.
Ultimately, the effect of a foreclosure on credit scores differs from borrower to borrower. Some homeowners with strong credit scores may see their scores drop by as much as 100 points or more after suffering a foreclosure. Homeowners with lower credit scores may;see a smaller decline, but only because there’s less room to fall.
While your credit scores may be hit hard, there’s plenty you can do to immediately begin rebuilding your scores. Paying your bills on time and using credit cards responsibly can go a long way toward repairing the damage. As long as your other accounts are in good standing, you could be back on track within two years because credit score providers often attach more weight to events that happened in the most recent 24 months.
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Its Possible But Youll Need To Rebuild Your Credit Before You Apply
If its the American Dream to own a home, then going through bankruptcy or foreclosure very well may be the American Nightmare. But if youve filed for bankruptcy or been through a foreclosure at some point, all is not lost. Its still possible to obtain a mortgage in the future if you follow these steps.;
What Happens If The Foreclosure Stays On Your Credit Report Past That Date
Although a foreclosure should automatically disappear from your credit report after seven years, that doesnt always happen. If seven years have passed from the date of your first missed payment and youre still seeing the foreclosure entry on your credit report, the error can be challenged by filing a dispute with the credit reporting agency. Once the dispute is filed, the agency will have 30 days to investigate the circumstances. We can help in this process, and we can even sue the credit agencies to correct the error and recover damages if they wont remove it after proper notice.
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Do I Still Have To Pay The Debt
If youre wondering how long something stays on your credit report, its important to keep this in mind: Your debt isnt simply erased once it falls off your credit reports. If you never paid off the debt and the creditor is within the statute of limitations, they may try to collect the money. The creditor can call and send letters, sue you or get a court order to garnish your wages.
Even outside the statute of limitations, collection companies can still try to collect the debt. Stale debts represent a thriving business, as they are often sold and resold for pennies on the dollar. Even a partial payment makes a call or letter worthwhile for the collector.
The only sure way to get rid of a debt is to pay what you owe, or at least an agreed-upon part of what you owe. If youre looking to put your debt behind you and move on with a clean slate, contact the collectors listed on your credit report. Before making the phone call, make sure you know:
- The debt is legally yours.
- How much you owe the creditor.
- What you can realistically afford to pay per month or in a lump sum.
If you negotiate a payment for less than the full amount owed, be sure to get the payment agreement in writing from the collector before you send in any payment.
How Long Will A Short Sale Stay On Your Credit Reports
In real estate, a short sale is an attempt to sell your home for an amount less than what you owe. You must have the lenders approval to do this, and not every mortgage lender will let borrowers pursue this course.
The upside: Youll likely be able to get back into the housing market sooner. Most mortgage lenders wont give you a mortgage loan for several years after a foreclosure. Youll face a waiting period of three years for an FHA or USDA home loan, and seven years for a new mortgage from Fannie Mae or Freddie Mac.
By contrast, with a short sale, former homeowners may be eligible to re-enter the home-buying market after only two years.
The downside: Short sales, like foreclosures, hurt your credit score. If youve got very good credit , a short sale could cost you 150 points or more. If your FICO score is in the average or good range, you could drop 100 points. However, short sales have less effect on your credit score than foreclosures.
If you already have a bad credit score, youll lose fewer points, but it will dig you deeper into the credit hole. In any case, it will become part of your payment history.
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What Exactly Is A Foreclosure
A foreclosure is one of the worst possible outcomes when you borrow money to buy real estate.
A mortgage uses your home as collateral on the home loan. If you cant make the monthly mortgage payments, the lender will eventually foreclose.
This means the lender claims ownership of the property and sells it to pay down the loan.
You should know homeowners wont face foreclosure because of a few late payments or one or two missed payments. Lenders lose money when they foreclose so it really is a last resort for them as well as for the borrower.
But if youve gone more than 120 days without making a payment, foreclosure is a real possibility.
How Does Foreclosure Affect Your Credit
- Its a major derogatory event without question
- Up there with a bankruptcy
- But its impact can vary greatly
- Based on the credit history of the borrower
Now that we discussed how long a foreclosure can impact your credit score, lets talk about how a foreclosure affects your credit. Knowing more about how it works can help you better cope and deal with it.
Unfortunately, credit questions are never black and white, mainly because every consumer has a unique credit profile, making it impossible to pinpoint credit scoring impact across the board.
But FICO released some interesting data recently regarding the effect of foreclosure on different types of consumers and their credit scores, shedding a little light on an often disputed topic.
A big driver of the credit score damage has to do with where you stood before the event took place. Context is everything. Well, its a lot.
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Why Is Good Credit Important
Good credit provides you with more opportunities to borrow money and qualify for jobs. A credit report is often accessed when you attempt to purchase items, secure credit cards, find housing, or apply for work. For example:
- If you need to borrow money to purchase a car, you will need an automobile loan;
- When buying a home, most individuals receive credit in the form of a mortgage loan;
- To rent an apartment, you often need to demonstrate strong credit;
- When you obtain a standard credit card or store credit card, the company gives you credit by issuing you a card;;
- For some potential employers, you will need a good credit report to be considered for a job; and
- Good credit provides you with a higher general credit score.
A lack of good credit can hinder your ability to accomplish some very important goals.