Facing foreclosure can be overwhelming and scary. Having your home go through foreclosure can impact you in all areas of your life.
Once the initial shock of foreclosure and losing your home wears off, you may wonder where that leaves you financially. Foreclosure can negatively impact your credit score. If you’re looking to buy a new house or get other credit, you may need to work to improve your credit after foreclosure.
If you’ve been through foreclosure or are going through foreclosure, an experienced foreclosure attorney can help you through the process. Contact Joshua Denbeaux today to learn more about how we may be able to help you.
How Does Foreclosure Impact Your Credit Score?
Your credit score is a numerical measurement of how reliable creditors find you based on how you’ve used credit in the past. When you’re applying for credit, creditors look at your credit score to decide whether or not they should lend you money.
Anytime you default on a loan, your credit score will be hurt. Foreclosure can significantly decrease your credit score.
The impact foreclosure will have on your credit score varies for each situation. The higher your credit score before foreclosure, the more foreclosure will impact your credit score. A foreclosure can stay on your credit score for up to 7 years.
If your house is foreclosed on, it will negatively impact your credit score. However, there are things that you can do to help your credit recover from the foreclosure while it’s still on your credit score.
Tips to Improve Your Credit Score After Foreclosure
There are a few different ways that you can work to improve your credit score after foreclosure.
Review Your Credit Report
When a lender reviews your credit score, it counts as an inquiry into your credit, but you can check your credit score three times a year for free without impacting your credit score. Checking your credit report is always a good idea, but it’s especially important after a foreclosure.
You should check for any reporting errors made by lenders. Your lender may have mistakenly reported that you missed a payment when you didn’t, which can hurt your credit.
You should also check your credit report for unfamiliar accounts. Accounts you’re not aware of could be a sign that you’ve been a victim of identity fraud.
Your credit report will list any unpaid balances or delinquent accounts. It’s important to be aware of these, including making sure your foreclosure was correctly reported. Paying off unpaid balances or delinquent accounts is a great place to start when it comes to improving your credit after foreclosure.
Timely Payments
It’s understandable that after going through a foreclosure, you may be tempted to get rid of your credit cards or any other lines of credit that aren’t necessary. It’s important for maintaining your credit to continue to use your credit cards and reestablish a strong payment history after foreclosure.
Having a positive payment history is an important part of your credit score. Using credit cards and paying off your balance whole and on time each month can help your credit score improve.
Low Credit Utilization
Your credit utilization ratio is your monthly revolving credit divided by your revolving credit limit. Your credit utilization ratio is calculated using your minimum required monthly payment.
High credit utilization, when you’re using a lot of your available credit, is considered a sign that you’re struggling to pay your monthly expenses on your current income. Paying down your credit card balances instead of only paying the minimum payment can positively impact your credit score after foreclosure.
Keeping your credit utilization low shows creditors that you’re able to pay your bills each month and can help improve your credit score.
Establish New Credit
Getting new credit can help improve your credit score. With a foreclosure on your credit report, you may have issues qualifying for new credit.
There are credit products specifically designed for individuals with impaired credit. Products like credit builder credit cards or loans and secured credit cards are credit options for which you may be more likely to qualify with a lower credit score.
When looking to establish new credit, you need to be careful of how many lines of credit you apply for. Applying for or opening a lot of lines of credit at once doesn’t look good to lenders because it can look like you need a lot of credit all at once.
Debt Consolidation
Another option to make reestablishing your credit easier is debt consolidation. Debt consolidation is when you transfer existing high-interest debt to other accounts or loans with lower interest rates. Consolidating your debt can help you save money throughout the life of the debt.
If you’re struggling to make payments on time or to pay down your balances, using debt consolidation to get a better rate can reduce the total amount you’ll pay and make it easier to manage a single payment instead of multiple payments.
Contact a Foreclosure Attorney Today
Going through foreclosure is stressful, and it can be easy not to realize how much it can impact all aspects of your life. If you’re going through foreclosure or your house has already been foreclosed on, you can still do things to put yourself in the best possible position.
An attorney can help you through your options to avoid foreclosure or help minimize the impact of foreclosure on your credit score and future.
It’s never too late to start working with an attorney. Contact Denbeaux Law today to learn more about the foreclosure process and how we may be able to help you.
