Help After Foreclosure

Use credit, but use it wisely to re-establish your credit after a foreclosure.

According to the Federal Deposit Insurance Corporation, about one in every 200 families will eventually face foreclosure. As if the stress of going through the process of foreclosure is not enough, you must also create a plan for recovery once the foreclosure is complete. This means taking both short-term, immediate needs as well as long-term goals into consideration when thinking about your future. Although going through a home foreclosure can be financially and emotionally devastating, help is available and, yes, it is possible to recover.

Housing

Finding adequate housing is a priority item on your to-do list. Since it will take a minimum of two years before you can qualify for another mortgage, renting may be your only option. Many property owners look at your credit report as part of the application process, so consider the possibility of getting a cosigner, or ask a friend or business colleague to write a letter of recommendation on your behalf. Your former lender may also be a source to turn to for help. According to Freddie Mac, rather than forcing you out of your home, some lenders will allow you to stay and rent on a month-to-month basis. If your situation becomes critical, contact the U.S. Department of Housing and Urban Development. HUD has a number of housing assistance programs as well as qualified counselors who may be able to assist you (see Resources).

Money Management

Getting your finances in order and creating a workable budget is your next post-foreclosure task. Although you can accomplish this on your own, if you have outstanding debt in addition to your foreclosure or find creating or sticking to a budget difficult, you may want to consider seeking the help of a credit counselor. A credit-counseling agency can help you create a budget and a plan for managing debt and, in some cases, provide educational resources or workshops that increase your knowledge of personal finance topics. The Federal Trade Commission recommends looking for a qualified credit counselor using the resources of your church, educational institutions, local housing authorities or a branch of the U.S. Cooperative Exchange Service.

Credit Repair

Your credit rating takes a major hit after a foreclosure. According to MortgageLoan.com, it will take about two years to raise your score enough to once again qualify for credit, and the time to start working on your score is now. First, get a free copy of your credit report from all three major reporting agencies and make sure the information they contain is correct (see Resources). Then, once you have your finances in order, start to re-establish credit with a secure credit card, gas or store card. Although you may at this point feel uneasy about using credit, keep in mind that the only way to establish a good credit history from this point forward is to use credit, but use it wisely.

Personal Considerations

Going through a foreclosure often results in conflicting emotions, depression and a great deal of stress. As a result, you may want to consider getting help for both you and your family so that you can all put this ordeal behind you and move on to a better life. Talk to your doctor, take advantage of counseling services your employer may provide and remember that exercise is a great stress reliever.

References

• Federal Deposit Insurance Corporation: Foreclosure Statistics
• FreddieMac: How to Rebuild After a Foreclosure
• Federal Trade Commission; Knee Deep in Debt; February 2011
• MortgageLoan.com; After Foreclosure: Mortgage Help; Catherine Brock; April 2008
• PostForeclosureHelp.org: Post Foreclosure Help Resource List

Resources

• U.S. Department of Housing and Urban Development: HUD Approved Housing Counseling Agencies
• Washington State University: List of All U.S. Cooperative Exchange Service Websites
• AnnualCreditReport.com: Request Your Free Annual Credit Report
• Federal Trade Commission; How to Dispute Credit Report Errors; September 2008