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How Will Foreclosure Affect My Credit Score?

Posted on in Foreclosure

Lake County foreclosure lawyersRegardless of who you are, how much money you have, and the types of property you own, the word “foreclosure” is likely to generate feelings of fear, anxiety, and stress. If you are struggling to make the mortgage payments on your family home, the idea of foreclosure is likely to be especially frightening.

Most people understand the basic steps of foreclosure, even if they do not know all of the details. In short, they know that the lender will eventually force a homeowner who is in default to leave the property. Then, the lender will reclaim possession of the home and attempt to sell it in an effort to recoup some of the losses incurred. What many people do not realize, however, is the effect that a foreclosure will have on the borrower’s credit score.

Your Credit Score

Your credit score is a statistical rating that lenders and other institutions use to evaluate how well you manage debt. Credit scores can range from 300 to 850, and higher scores indicate stronger creditworthiness. A credit score above 740 is considered to be “Very Good,” and above 800 is considered “Excellent.” Between 670 and 739 is “Good,” while 580 to 669 is “Fair.” Anything below 579 is considered “Poor.”

There are many factors that can influence your credit score, including any loans or debts that are outstanding, your record of making timely payments on credit cards and loans, and much more. A foreclosure will certainly have an effect on your credit rating.

The Impact of Foreclosure

According to a recent study conducted by LendingTree, a foreclosure will continue to impact a person’s credit score for several years after the foreclosure is finalized. The good news is that you can rebound from a foreclosure fairly quickly.

The biggest hit to your credit score will take place within the first year, as your credit rating can drop by 150 points or more. Depending on where you score started, this could drop you into a lower rater category, but for most people, this is not irreparable damage. For each year after the foreclosure, your credit score can increase by about 10 points, presuming that you are keeping up with your other obligations. If you are skipping credit card payments, for example, your credit score could continue to drop. After seven years, the foreclosure will no longer be considered in calculating your credit score.  

A Libertyville Foreclosure Lawyer Can Help

The best way to prevent having foreclosure cause damage to your credit score is to avoid foreclosure altogether. At Newland & Newland, L.L.P., our experienced Lake County foreclosure defense attorneys are equipped to help you find workable solutions if you are behind on your mortgage. For more information, call 847-549-0000 and schedule a free consultation with a member of our team today.

 

Sources:

https://www.lendingtree.com/home/cost-of-foreclosure/

https://www.foxbusiness.com/economy/home-foreclosure-impact-credit-score

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