Can You Improve Your Credit Score After a Foreclosure?
According to AOL Real Estate, losing your property to foreclosure can reduce your personal credit rating by as much as 300 points. This decrease can lower your 680 credit score down to 380, and completely prevent loan approvals in the near future. Fortunately, you can reverse the effects of a home foreclosure and improve your credit score.
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Continue to Use Credit
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If you have a credit card or other loans after your foreclosure, continue to manage these accounts by paying the statements on time and satisfying these debts. Timely payments can help improve your credit after foreclosure, because payment record makes up 35 percent of your credit score. Credit scores will not improve overnight, but with a consistent habit of paying on time and avoiding late or skipped payments, you can slowly fix your credit and regain points lost after a foreclosure.
Get Rid of Debt
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Paying off creditors is another surefire tactic to help fix your credit after a home foreclosure. Like payment history, paying down debts make up a huge percentage of your personal score, approximately 30 percent. After losing your home to your mortgage lender, work on paying down your existing balances and don't take out new loans. Pay more than your minimum each month and limit credit card use to help reduce your outstanding balances faster.
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Choose Housing Carefully
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After losing a home to foreclosure, you'll likely need to find a house or apartment to rent. Rather than rent a place that takes a chunk of your monthly income, choose an inexpensive place or one that's no more than 28 percent of your gross monthly income. Finding a place you can afford provides extra money to start saving and pay down debt.
Credit Report
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Keep a close eye on your credit report to make sure creditors report accurate information. Mistakes such as collection accounts, liens and late payments can decrease your already low credit score. Annual Credit Report makes it possible for each consumer to check their report once a year for free. Also, periodically monitor your credit score by getting your report from Myfico.com. For a fee, you can get your scores from all three of the major credit bureaus. A score of 620 qualifies you for an FHA mortgage loan after three years.
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References
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