With all the foreclosures sprouting up, struggling homeowners that are either going through the process or teetering on the brink may be wondering what the repercussions are.
With regards to credit, foreclosure is a very serious delinquency, and one that will stay on your credit report for up to seven years (typically from the date of filing).
Initially, the foreclosure will hit your credit score big time, likely dropping it more than 150 points, pushing even the most prime borrower into subprime status.
However, as time goes by, your credit score will inch up, assuming you continue to pay your other bills and meet other commitments in a timely fashion (this is key to recovery).
The presence of the foreclosure record on your credit report doesn’t mean you can’t obtain mortgage financing for seven years, but it does mean creditors will be able to see the red flag and punish you accordingly.
Even if you meet the bank or lender’s requirements for past foreclosures, an underwriter could still determine that you are too risky for a subsequent mortgage if you’ve got other iffy stuff going on.
You may also be subject to more stringent guidelines going forward, like a larger down payment requirement.
Keep in mind that the longer you put off foreclosure, the longer the recovery period; that’s not to say give in, but take note.
Like any other derogatory credit account, it’s possible to get a foreclosure removed from your credit report, though you’ll probably need a compelling reason and a whole lot of legwork.