After filing for foreclosure, it is important to understand the effects it will have on your credit score and future financial situation. While you won’t be knocked down forever, a foreclosure will put a pretty serious dent in your score. Speaking to a financial adviser can go a long way in helping you understand and recover from a foreclosure, but here is a quick look at some of the basic effects it will have on your credit score.
Foreclosure and Your FICO Score
Your credit score, otherwise known as FICO score, is one of the primary things a lender looks at when attempting to qualify you for a loan. A foreclosure will lower your score and likely prevent you from getting good interest rates and lines of credit. The drop will vary, depending on what your FICO score was at prior to the foreclosure, but could be as significant as 100 points. An already low score will see less of a drop.
Improving Your FICO Score
Once you see how a low FICO score can affect your ability to receive credit, you will probably proactively look to improve it. The best way to improve your FICO score is by paying off other debts and letting time pass. As you prove yourself financially responsible, your score will steadily rise and lenders will be more likely to offer you loans.
Obtaining Future Mortgages after Foreclosure
While you will likely be required to wait a few years before being given the opportunity to have new mortgage, it is possible to get a new one in as little as a year after foreclosure. The important thing is to continue to prove your financial responsibility and not set expectations too high.