How to Build Credit After a Foreclosure

Losing your home to foreclosure is devastating, and you can expect your credit score to decrease. It's difficult to obtain new lines of credit after a foreclosure. And even if you're approved for another home loan, the lender will likely charge a high rate, which amounts to a higher mortgage payment. However, the effects of a foreclosure don't last forever. There are ways to build credit after a foreclosure and re-establish a good credit rating.

Difficulty: Moderate

Instructions

1. Request your credit score and credit report from Annualcreditreport.com. This will allow you to assess the damage to your credit rating.

2. Apply for a secured credit card. Secured credit cards require a security deposit, and they're designed to help people with bad credit and no credit history develop a good credit rating. Contact your bank or another credit card company and apply for a card.

3. Pay your creditors. Late and skipped payments reduce your credit score. To build credit after a foreclosure, resolve to pay your creditors on time. If possible, submit payments days or weeks before the due date, or sign up for automatic bill payment to ensure timely payments.

4. Maintain low balances. Maxing out credit accounts and carrying high balances reduces your credit score. If you want to rebuild credit after a foreclosure, pay off or lower your existing credit card balances. This adds points to your credit score.

5. Use a co-signer. Applying for a small bank loan or financing an automobile can help you build credit after a foreclosure. Ask someone with a good credit history to co-sign the loan. This increases your approval odds, and the lender may offer a lower interest rate.

References

• Federal Reserve Board - Improve Credit
• My Fico - Improving Your FICO Score

Resources

• Annual Credit Report

Who Can Help Sponsored

• How strong is your score?  Did you know checking your own credit won’t affect your score? Click here to see yours in two easy steps from Experian.