What Impact Does a Foreclosure Have On My Credit Score?
We often find ourselves in tough financial situations that may require the help of lenders. Lenders will look at your credit history to determine your viability as a borrower. If your house is facing foreclosure, you may be wondering how, if at all, it can affect your credit score.
DoNotPay is here to help you answer all your questions regarding We also offer you an efficient and fast solution to clean up your credit report with ease. Read on to find out more.
What Is Foreclosure?
A foreclosure occurs due to several missed mortgage payments. Typically, if you are three to six months behind on your mortgage payments, a lender can legally seize your property to recover as much of the debt as possible. The lender or bank can initiate one of three kinds of foreclosure:
| A judicial foreclosure | This type of foreclosure is allowed in all states and required in some. The creditor files a suit with the judicial system. The debtor will then receive a 30-day notice to settle the debt and avoid foreclosure or have their property auctioned by a local court or sheriff's office. |
| A statutory (or power of sale) foreclosure | This type of foreclosure is allowed in many states, provided that the mortgage includes a "power of sale" clause. In this type of foreclosure, the mortgage company will hold a public auction if the debtor does not settle the debt within the timeframe indicated in the notice. |
| A strict foreclosure | This type of foreclosure is limited to some states and only happens when the debt is more than the property value. Generally, the lender files a lawsuit against the borrower.The mortgage holder takes over the property if the homeowner cannot pay within the court-determined deadline. |
How Does a Foreclosure Affect My Credit Score?
Generally, a mortgagee issues a notice to the mortgagor after three missed monthly payments in a row. The notice instructs the homeowner to settle the missed payments in 30 days, failure to which foreclosure begins. Every missed payment on your mortgage loan damages your credit rating. Additionally, a foreclosure will hurt your credit score further.
Apart from lowering your credit score, many creditors view foreclosure as a serious adverse event in your credit history, second in severity to bankruptcy. Many lenders do not consider applicants with . However, some lenders will consider applicants with foreclosures that are several years old as long as they satisfy all other criteria.
How Long Does a Foreclosure Stay On My Credit Report?
Typically, will appear on your credit report one or two months after the lender initiates foreclosure proceedings. The foreclosure entry will remain in your credit report for seven years, effective from the date of the first missed payment that led to the foreclosure. Once the seven-year period elapses, the foreclosure entry will be deleted from your report.
Can I Remove a Foreclosure from My Credit Report?
If a foreclosure entry on your credit report is legitimate, it cannot be removed from your report before the seven-year period elapses. However, if any information on the foreclosure is incorrect, you can dispute your credit report and have it corrected or deleted. To do this, you will need to:
- Write a credit dispute letter explaining why the foreclosure record does not belong on your credit report.
- Request a debt validation letter from the mortgage holder.
How Can I Improve My Credit after a Foreclosure?
All hope is not lost. You can fix your credit score after a foreclosure. You will need to:
- Continuously monitor your credit report for errors and inaccurate information.
- Identify the reason behind the foreclosure by going through your finances and spending habits to avoid defaulting on another loan.
- Prioritize paying your bills on time.
How DoNotPay Can Help You Clean Up Your Credit Report
If you want to clean up your credit report but don't know where to start, DoNotPay has you covered in 3 easy steps:
- Search Clean Credit Report on DoNotPay.
- Prepare a recent copy of your credit report that you can use as reference.
- Let us guide you through the 4 potential options:
- If you've already paid off your debt, we'll help you file a Goodwill Removal Request to get it removed.
- If you notice any errors in your report (we have a list of common errors you can use!), we'll help you file a credit dispute to the creditor or major credit bureaus.
- If there are no errors, we'll check if you're still eligible to file a debt validation request. If they can't validate your debt, they're required to remove it from your report and they can't collect it!
- Lastly, if none of the above options work, we'll help you file a pay-to-delete negotiation letter. You can customize the amount you are willing to pay in exchange for getting the item removed.
You can also check out our other credit products, including Credit Limit Increase, Get My Credit Report, Keep Unused Cards Active, and more!
DoNotPay Always Has More to Offer
We understand how important improving your credit score is. We also understand how overwhelming it can be. DoNotPay can help you with several credit-related issues and make your life easier. We can help you:
Apart from these, DoNotPay has many more features, like:
- Dealing with HR complaints without getting fired
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Get access to these and more products when you for DoNotPay today!