How Does Foreclosure Affect Your Credit?
Like any major financial setback, going through a foreclosure is inevitably going to negatively affect your credit. However, the impact is not one size fits all. The many factors associated with foreclosure and your financial standing determine how big a hit your credit could be taking. While some may see a considerable drop lasting a couple of years, others may see a decline that sticks with them 7 years or sometimes longer. While there’s no avoiding a credit slump after foreclosure there are ways to determine just what the damage may be before making the difficult decision to go through with foreclosure.
Foreclosure vs. alternatives
Before committing to foreclosure, or one of its alternatives, it’s important to recognize that your credit will begin to take a hit as soon as you fall behind on payments. As early as 30 days after your missed payment, your lender will begin reporting late payments to the credit bureaus. This, along with many other reasons, is why it is especially important to consult a Foreclosure Defense attorney as early in the process as possible in order to avoid as much irreparable damage as possible.
If you’re able to come to a resolution with your lender that avoids foreclosure, your credit could be saved some points. For example, moving forward with a short sale, or loan modification may secure less credit loss than resorting to foreclosure.
Average credit score point loss:
- 30 days late on mortgage: 40 to 110 points
- 90 days late on mortgage: 70 to 135 points
- Foreclosure, short sale or deed-in-lieu: 85 to 160
- Bankruptcy: 130 to 240
Good Credit vs. Poor Credit
Your current credit standing could also be a sign as to how much credit you stand to lose following a foreclosure. Generally speaking, those with great credit tend to be impacted more substantially, than those with average or low credit. For example, within the scale above, a loss of 85 to 100 points may apply to an individual whose original credit was near or around 680. A loss of 140 (or even up to 160 points) may be the result of a foreclosure for an individual with an excellent original credit score in the 780s.
A foreclosure can be one of the most damaging factors to an individual’s credit, but that doesn’t mean it is permanent. The average length of time a foreclosure stays on your credit is 7 years. While this may seem long to some, don’t assume your lowered credit is frozen for 7 years simply because the foreclosure is still apparent. Throughout these years, assuming healthy financial habits, your credit may continue to gradually improve.
If you’re behind on your mortgage, or anticipate being in the near future, contact an experienced foreclosure defense attorney as early as possible. Contact our office to discuss your options, and any or all potential consequences associated. To set up a consultation, contact our office at (702) 998-1188, email@example.com, or by scheduling a consultation online.