One of the things you might worry about if you are facing foreclosure is how foreclosure will affect your credit score. Obviously, a foreclosure will have a negative effect on your credit, but just how bad will it be? Will you ever be able to buy a house again?
The answer to that last question is an absolute “yes!” But how long it will be before you can qualify for a mortgage after foreclosure is another question entirely, and the answer varies greatly from one case to the next. The minimum time you will need to wait before you will be able to qualify for a mortgage is usually around two years. However, in some cases it can take much, much longer.
Bankruptcy and Eviction
Two things that can increase the amount of time it will take for you to be able to buy another house are bankruptcy and eviction. Unfortunately, these two processes often accompany a foreclosure. Your credit will suffer less from the foreclosure if you can avoid bankruptcy and eviction.
When someone who is being foreclosed on waits until the last minute to move out of the home, an eviction results. It is easy enough to avoid having an eviction on your credit record in addition to the foreclosure. All you have to do is move out before it gets to the point where the bank or new owner is forced to file an eviction notice against you.
Avoiding bankruptcy may not be so simple. In some cases, the bank may be able to get a deficiency judgment against you if the house does not sell for enough to cover what is owed on it. If this happens, you could find yourself without a house and still owing the bank thousands of dollars. Many people faced with this situation find themselves considering bankruptcy to wipe out the debt once and for all. Keep in mind that filing for bankruptcy will further damage your credit. It will also stay on your credit record longer. A bankruptcy can stay on your credit record for ten years, whereas a foreclosure only stays on your record for seven years.
Another situation where you might end up with both a bankruptcy and a foreclosure on your credit record is when you file for a chapter 13 bankruptcy reorganization and fail to follow through with your payments. This is actually quite common. Many times, the payments agreed to under bankruptcy organization end up being more than the people can really afford to pay. If you fall behind on your mortgage payment after entering into a chapter thirteen bankruptcy, a foreclosure will probably soon follow. That will leave you with both a bankruptcy and a foreclosure on your credit report.
How to Repair Your Credit after Foreclosure
Forget about using a credit repair company to fix your credit. They can only remove negative items that are incorrect, and you can do that yourself. Since the negative items on your credit report are not incorrect, they will be put right back on your credit report as soon as the credit bureau is able to obtain proof that the information is accurate.
The only way to repair your credit is by making a commitment to pay every bill on time and then doing it. By doing this, you are proving to banks and other potential creditors that you have made a turnaround and are now doing better at handling your finances. Once you have a solid two-year history of paying everything on time, you should have a decent chance at getting a new mortgage.
If really need help repairing your credit, look for credit solutions that work with your creditors to help make it easier for you to make your payments. These companies often provide debt negotiation services, which can actually reduce the amount of money you’ll need to repay. At the very least, they will be able to put together a debt consolidation plan that allows you to make a single payment each month instead of dealing with each creditor separately.
Minimize the Damage to Your Credit
Now that you know what happens to your credit after you foreclose, you can take steps to minimize the damage caused to your credit score by foreclosure, and work to rebuild your credit following the foreclosure. This will allow you to get your credit into the credit score range where you can qualify for a mortgage so that you can buy another home as quickly as possible.