Even after seeking a loan modification or professional guidance, a home foreclosure sometimes becomes unavoidable. Whether you’re working to avoid a foreclosure or have recently experienced one, it’s important to understand how it impacts your credit score. Unfortunately, credit bureaus are often uncommunicative about exactly how mortgage delinquencies affect credit scores and history, so the damage can blindside some individuals.
What to Expect on Your Credit History
Credit scores can be damaged through a variety of reasons. When it comes to mortgage payments, those variables include:
- Late payments
- Short sales
A foreclosure not only has the potential to damage your credit score by 85 to 160 points and in some cases 200-300 points, but also stays on your credit history for at least 7 years. An indirect consequence from a foreclosure that results from these damages is higher interest rates on your home loans, auto loans, and any type of credit payment.
While a foreclosure remains on your credit history for 7 years, there’s the possibility of having it removed once the time has passed. The foreclosure can only be removed if you submit a written request to the three major credit reporting bureaus asking for the event to be removed from your credit history.
The important thing for people who have experienced a foreclosure to remember is that while it can cause temporary hardships, a foreclosure doesn’t have to stain your credit history forever. It’s possible to rebound, especially with the guidance of a credit counselor. Rebuilding credit takes time, so it’s important to learn what you can do now to re-establish your credit history once 7 years has passed from the foreclosure.