Foreclosure can seriously damage your credit and also affect your spirits. Getting back on track with your life includes improving your credit score. Credit impacts just about everything we do from buying a house to getting a job. So it is important that you maintain good credit. There are mainly two reasons why people end up in foreclosure. Economic hardships beyond their control and bad credit management. If you fall into the second category, you need to develop good credit habits before you can restore and improve your credit. The problem for most people is they don’t know where to begin. You may want to speak to a credit counselor at a debt management and credit repair company. The credit specialist is an expert in the field of credit repair and restoration and debt management.
To start, you will need to pull a copy of your free annual credit report. However, for a fee under $35.00, you can obtain your credit report from all three credit bureaus-Equifax, Experian and Trans Union, and get your credit score. The score gives your creditors an indication of your credit worthiness. FICO scores are the most common scores that are used for reporting credit. The scores are determined from various credit data in your file such as your payment history, credit balances owed, the length of credit, how you use credit and new credit. Negative items such as judgments, collections or charge offs, foreclosures, short sales, deeds in lieu of foreclosure and late payments all impact your credit score negatively. Bankruptcy and foreclosure can lower your score as much as 200-300 points. Scores range from highest to lowest. 800 and above represent the best scores and 300 is the worst score. To obtain the best interest rate on a traditional mortgage, you will probably need a credit score of 700 or above. If your score is below 620, you probably won’t even qualify for a mortgage. Now that you know the ranges of scores, you need to understand the impact of a good score and a bad score.
With a good score, you will be able to obtain a mortgage, car loan and credit cards with lower interest rates and even qualify for certain types of high security employment. Employers use credit checks to determine your level of responsibility and character. If you have good credit, they assume you will be a responsible and trustworthy employee. Of course, not every employer will consider just your score; they are concerned with your experience and education. Also, right now, even people that had credit scores of 800 or higher are experiencing tough economic times and many have gone through foreclosure or bankruptcy. So you are not alone if you have bad credit as a result of a bank foreclosure. The important thing to remember is you can improve and change your credit over time. While a bank foreclosure does stay on your credit for 7 years, the most serious impact on your score is right after the foreclosure occurs. The longer period of time after the foreclosure, the less impact it has on your score.
There are some things you can do right away to start improving your credit after foreclosure such as reviewing your credit report to make sure it is accurate. About 75% of consumers have mistakes on their credit reports. Typically mistakes occur for the following reasons: Someone with the same or similar name applied for credit and a clerical error was made; the wrong social security number was given or misread or the spelling of a name or address on a hand-written application was entered incorrectly on your report; or payments were applied to the wrong account, and as a result show up as late on your account. These types of errors are the easiest to correct. To get the errors removed from your report and payments reported accurately, you need to write to the three credit bureaus to dispute the items. Be specific as to why they are wrong, and attach any necessary documentation. It may take a month or two before the information is deleted and/or corrected so be patient. The credit bureaus will advise you in writing once they have made the correction and will send you a revised report. Even if there are no errors on your report, you can dispute items. If fact, the more items you dispute, the better. The credit bureaus will contact the creditor. If the creditor does not respond in 30 days, the bureaus will delete the information from your file. Getting rid of negative items will immediately bring your score up as much as 100 points.
You may want to speak to your credit specialist about setting up a budget for you so you can manage your credit wisely. Only use your credit cards for emergencies, and pay them off each month to avoid interest and penalties. Get smaller credit limits. You can ask your credit card company to reduce your limits if they are too high. This way you know you can only spend what you can afford. Pay cash or write a check whenever possible for daily living expenses such as groceries and gas.
You may also want to set up automatic bill pay for your car payment and any other installment payments. This way, your payments will be made on time and reported as timely by our creditor to the credit bureaus. This will help you improve your score. It’s more efficient for you and your creditor, and you can track your payments and balances easier because everything is in one place. You don’t have to search through old bank records. In case there is an error, you can find it right away. If you need to find a credit card after your bank foreclosure, your credit specialist can help you find a secured card. A secured card is secured by a savings account in your name for the same amount as your credit card. You sign an agreement that if you default, the credit card company can use the proceeds in your savings account to pay off your card, and return the remaining balance to you. You can close the account at any time also by using the money in your savings account to pay the card off. The good thing about a secured credit card is it helps you re-establish your credit because the credit card company reports your payment history to the credit bureaus. Another good way to improve your credit is to have a relative or friend co-sign for a small loan. When you make your payments on time, it also gets reported and helps to raise your score.
The important thing to remember about credit is that it changes all the time. If your credit is bad today it will be better in 6 months and good in a few years if you get into the habit of managing your credit responsibly. A credit repair specialist can help you get started on the right path to restoring and rebuilding your credit today.
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