How Are Foreclosures Reported?

Losing your home to foreclosure hurts your credit rating.

When your mortgage company forecloses on real estate you own, your local government enters the foreclosure into the county's public record. It subsequently appears on your credit report and adversely impacts your credit rating.

Facts

Mortgage companies do not report foreclosures directly to the credit bureaus. Rather, the credit bureaus assign representatives to each geographic area. These representatives regularly browse recent public records. They then update consumer credit reports with the new information. The credit bureaus also update credit reports with foreclosures by searching court records included in the Public Access to Court Electronic Records database.

Time Frame

According to the Fair Credit Reporting Act, both your mortgage company's trade line reflecting the missed payments leading up to the foreclosure and the foreclosure notation itself must be removed from your credit file after seven years.

Effects

Once a foreclosure appears within your credit file, your credit score can drop by up to 300 points. The higher your credit score was prior to losing your home, the greater the damage it will suffer following a foreclosure. Your credit score will gradually improve over time, however, as the older a derogatory entry is, the less impact it has on your credit rating.

References

• MyCreditCenter: FAQ
• Federal Trade Commission: Fair Credit Reporting Act (Section 605 p.23)
• AOL Real Estate: How Foreclosure Affects Your Credit Score and Your Life
• MyFICO: What's In Your FICO Score

Resources

• NOLO: How Foreclosure Works
• University of Illinois Extension: Life After a Foreclosure
• Federal Trade Commission: Credit Repair -- How to Help Yourself