What Will Happen to My Credit Cards After Foreclosure?
Going through a foreclosure causes you to change your living arrangements and damages your financial situation. While most people realize that it can hurt their chances of getting a mortgage again in the future, it also can lead to problems with your credit cards. Your credit card accounts could be altered after a foreclosure.
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Credit Reporting
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Once you go through a foreclosure, the lender reports it to the credit bureaus. The foreclosure goes on your credit report and every creditor can then see it. Once this happens, it becomes difficult to obtain additional financing in any area. You cannot get a mortgage immediately after the foreclosure, but you can also not get other types of financing, in many cases. If you do qualify for financing, it will be at a higher interest rate than what you would ordinarily receive.
Default Rates
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Many consumers are unfamiliar with the default rates that come with credit cards. When you open a credit card account, you sign an agreement that states the credit card company can change the interest rate on your credit card account at anytime. When you default on a debt, as you do in a foreclosure, the credit card company can see it on your credit history and then charge a higher interest rate on your credit cards from that point forward.
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Other Accounts
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Many people think that as long as you continue making your payments on your credit card, you should not have any problems with your credit card provider. As a general rule, this is true, but with the default rate clause, the company can raise your rates because of actions that had nothing to do with your credit cards. After the foreclosure goes on your record, the credit card company can raise your rates even if you have been in good standing throughout the entire process.
Considerations
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If you go through foreclosure and your interest rates increase, it can cost you a substantial amount of money over the long term. These interest rates could go as high as 30 percent, according to Bankrate. While these rates can be very burdensome, they are not permanent. As you rebuild your credit, the credit card company can lower your interest rates again. When this happens, your primary goal should be to build your credit score back up and get things under control again.
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