Foreclosure & FICO

[Alec]

How many years will a foreclosure impact my credit score? Is there a better alternative to foreclosure with respect to FICO?

[Tanner]

2 Yrs

Foreclosure remains on your credit report for 7 yrs, but after 2 yrs it’s negative effect lessen.

It’s a common misconception that a foreclosure ruins your credit score for many years. The hard fact is that 70% of your Fico is determined by information from the previous 2 years, so a 2 yr old foreclosure still damage it, simply much less.

As to alternatives, both short sales & deeds-in-lieu of foreclosure will impact your FICO score much like a foreclosure because FICO considers all of them as “not paid as agreed” accounts.

The only other option I’m aware of is bankruptcy, but you don’t want to go that way. Bankruptcy is much more damaging to your FICO than a foreclosure.

[Emillia]

You need to re-establish good credit

For the foreclosure’s adverse affect to vanish – you need to re-establish good credit. Keep in mind that a foreclosure is a single negative account.

As bad as foreclosure can be, if it’s an isolated old negative item among stream of younger positive timely payments, then and only then it will have a negligible adverse affect once two years have passed.

Add to this another default, late payment or any other negative and you won’t see your FICO bounce back.

[007creditagent]

Foreclosure can be a distressing blow to your credit and these late payments will remain for 7 years in your credit report.

But it doesn’t mean you’ll never be able to buy a house again. With the right approach, you can build your credit score and apply for credit, loans and even a mortgage. Learn how foreclosure affects your credit score and what you can do right now to start repairing your credit.

Tips for credit repair after foreclosure:

1. Keep accounts paid to date – Staying up to date on all other bills will help to maintain your credit score and show future lenders that you’re able to make payments on time.

2. Identify the cause of the foreclosure – Evaluate your finances and spending history to figure out your missed mortgage payments.

3. Get professional help – Credit counselors can help you make a budget and debt management plan, and increase your credit score. Choose a reputable, certified credit counselor who works with you to better supervise your debt and rebuild your credit.

4. Don’t take out new loans and adjust your spending habits.

5. Save Money.

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