For many homeowners, foreclosure is a reality, but it’s not the end of the world or the end of your credit card. Foreclosure will remain on your credit report for seven years and will affect your credit most of the first few years. As foreclosure gets older and you add more positive history to your credit report, your credit will improve.
There is no magic formula to repair your loan after foreclosure. The more you make good decisions about using your credit, the better your credit will be.
Assess the cause of the foreclosure
Solving a problem is easier if you know the cause of the problem. It will be easier for you to repair your credit post foreclosure if you understand what is causing you to foreclosure. What could you have done differently? Maybe chose another mortgage? Managed your money better? Understanding why foreclosure can happen can help you prevent it from happening again.
Adjust your spending habits
If you don’t have your income budgeting, start now. Having a budget is not the chore many people think it is. If everything is done correctly, a budget helps relieve financial strain because it can make decisions about your money. If you have a budget before foreclosure but don’t stick to it, you can start again. Don’t forget to add your “actual expenses” to your budget at the end of the month. This way you can see where you have spent and make necessary adjustments.
Continue paying all other bills on time
Make sure to pay credit accounts that are reported to the offices regularly. This positive payment behavior will “pad” your credit score to help keep your credit completely devastating from a foreclosure. Not only does a creditor or lender who manually review your credit report see that the mortgage was the only thing that could hurt your credit and could be more forgiving with your application. Do not neglect other costs because they could end up on your credit report as collective accounts if you leave them unpaid.
Work on debt repayment
If your debt is high, your credit score will be violated even if you are paying your bills on time. Work on your credit card balance will be reduced to 30% of the credit limit or less. That means a $ 300 balance on a credit card with a limit of $ 3,000. Decreasing your debt level will also decrease your debt-to-income ratio. If you get a mortgage in the future, a lower debt burden will help you better handle your payments.
Get help when you need it
If you’re struggling to budget and put together a debt management plan, you can get professional help. A consumer credit counselor can work with you to find out how to make the most of your income. You will also negotiate lower interest rates and monthly payments with your creditors so you can work out of debt forever. Choose a credit counselor wisely. Beware of unscrupulous debt repayment companies that do further damage to your credit.
Get it and use a credit card
If you don’t have a credit card, apply for one, but only after you’ve evaluated it and adjusted your spending habits. Resist the urge to get a credit card just to buy things you can’t afford. Instead, use a credit card to pay off small purchases then in full balance each month. This shows that you can properly manage credit – borrow only what you can afford and pay it back in a reasonable manner.