Credit and Foreclosure: 5 Easy Things You Can Do TODAY to Start Repairing Your Credit After Foreclosure


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Starting over after foreclosure can be tough – especially if your dream is homeownership again. The AP article, Starting over after foreclosure, on Philly.com put it best, stating:

Next to filing for bankruptcy, nothing wrecks your chances of qualifying for a home loan like a foreclosure. . . That’s because the mortgage-lending guidelines most banks follow prohibit them from making loans to people with foreclosure or a short sale in their credit history, often for years. Never mind the hit a credit score takes.

How does a foreclosure impact your credit? How long does a foreclosure stay on your credit report?

A foreclosure stays on your credit report for up to seven years from the date of sale. However, in spite of this, you can start to rebuild your credit almost immediately to the point where you can qualify for a mortgage again in a few years (usually around three years).  You don’t have to wait until the foreclosure falls off your credit  report in 7 years.

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Have a Foreclosure On Your Credit Report? Here’s What to Do To Start Rebuilding Your Credit Immediately

 1. Pay All Bills on Time: Late payments are the number one reason credit scores drop. So if you’ve filed bankruptcy and/or gone through foreclosure, this is the easiest way to start repairing your credit.

2. Get More Credit: While this may not make sense, it’s necessary, especially if you filed bankruptcy and have no open/operational credit lines. You need to have credit to prove that you are credit worthy.

How to Get Credit When You Have Bad Credit 

But,” you may be thinking, “how can I get credit if I have bad credit (eg, filed bankruptcy/gone through foreclosure)?”

Easy . . . apply for a secured credit card. After 6-18 months, the line will become unsecured if you pay your bill each month on time, and creditors won’t know that it’s a secured credit card.

3. Open Checking/Savings Account: One thing lenders look for is a “normal” banking record. So, if you don’t have a checking and/or savings account (both are ideal), you’ll be looked at as a credit risk because most people with good credit do have these things. They don’t operate outside the credit lines (eg, using places like check cashing businesses to cash paychecks, paying bills with money orders, etc.).

4. Monitor and Dispute Items on Your Credit Report: Why is this important? Consider this: 

Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued or arrested, or have filed for bankruptcy. Credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home. [Source: How to Dispute Credit Report Errors, FTC.gov]

A Disturbing Study: Poor Disproportionately Affected by Credit Report Errors

By some estimates, up to 80 percent of credit reports contain errors. The Bankrate.com article, 80% of Credit Reports Have Errors, states:

. . . nearly 80% of credit reports contain some error, and at least 25% have errors serious enough to lead to loan and credit denials.  Mistakes can range from misspelled names and inaccurate birth dates to listing “closed” accounts as “open”, or even listing the same loan twice.

So, if credit information is being gathered and sold about you, you want it to be correct, for it impacts things like interest rate (as well as being qualified to get certain jobs).

But get this — if you’re low-income, you’re even more likely to have errors on your credit report. Proof?

Overall, 73 percent of consumers surveyed reported having some kind of error on their credit report.  The types of errors were further classified and those that could impact a consumer’s ability to qualify for credit were called serious errors. Fifty-one (51) percent of consumers surveyed showed at least one serious error on their credit report – roughly double that of national averages. [Source: Rochester’s Poor Have Twice as Many Errors on Credit Reports as National Average, EmpireJustice.org]

5. Get Proactive: The main thing to keep in mind after going through a foreclosure or bankruptcy is to get proactive with your credit; monitor your reports (from all three credit bureaus; not just one); open credit lines (not too many — 2-3 should be fine); and pay your bills on time.

Learn more about how to repair credit so you can get on the road to home ownership again.

Repairing Your Credit: How to Get a Free Copy of Your Credit Report

Order free annual reports from the three major credit bureaus (Equifax, Experian and TransUnion) by visiting AnnualCreditReport.com or calling 1-877-322-8228. (Note: This is the only place where you can get free credit reports once a year without any strings attached. The “free” credit reports advertised by other sources aren’t really free!) [Source: How to clear mistakes from your credit report, MSNBC.com]

Good luck!

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Stopping Foreclosure: Loan Modification Program That Helps Struggling Homeowners  

Because of Home Foreclosures, Buying a Home Is Cheaper than Renting in Almost 75% of Largest American Cities

Cash for Keys Program: If You’re in Foreclosure and Have Filed Bankruptcy What You Need to Know

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Mortgage Loan Modification: Top 10 Questions About (Home) Loan Modifications

Home Foreclosures: Why So Many Homeowners are In Limbo When Trying to Refinance or Modify Their Home Loans Now

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Copyright © 2012 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.

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