What do foreclosures have to do with credit repair? In the aftermath, many people ask themselves how they can rebuild their credit after foreclosure. It’s important to understand that a foreclosure is not like any other type of bankruptcy, and it will affect your credit score for up to 7 years.
If you’re struggling financially because of your home loan, you should know about some ways that may be able to help get you back on track fast.
How Long Does It Take To Rebuild Your Credit After A Foreclosure?
Most homeowners know that foreclosure is a negative mark on your credit report, but many do not realize how long the foreclosure stays on their consumer credit reports. Thanks to changes in 2005 by the nation’s three major agencies, you will be able to remove a foreclosure from your credit files seven years after it closes.
It continues to appear for another two years if you have an active duty status in the military or are self-employed during that period. Other non-military consumers can have a foreclosure removed from their reports after ten years.
If the home had been your primary residence for two of those years, you might be able to pull it sooner, depending on your state’s laws and agency guidelines.
Understanding your option for rebuilding your credit score after a foreclosure is the first step to finding financial freedom. You need to consider your credit score, average monthly payment, and income when deciding to take steps towards financial stability.
In addition, you must understand how long it will take for your foreclosure to be removed from your report so that you can plan accordingly.
While there are no guarantees that you will be able to rebuild your credit score, many companies and individuals can help. You should never turn down the option of working with a reputable professional regarding financial services like debt management or home loans.
Credit Repair: Post-Foreclosure Process
Suppose you are wondering about the credit repair process after foreclosure. In that case, it is essential to remember that every situation will vary depending on state laws, agency guidelines, and your ability to prove you are actively working towards financial stability.
Evaluate The Reason Of Your Closure
One of the best ways to deal with the situation is to understand why your credit was closed. This will give you a better idea of what you can do to rebuild your credit score.
If the foreclosure was caused by a job loss or other financial hardship, you must change your spending and saving habits. If there are problems with loan payments, consider taking out an installment loan like home equity lines of credit (HELOC), car loans, and personal loans.
Fixing some mistakes will prove that you are on the right track towards rebuilding your credit score regardless of how long before they remove the default from their reports.
Adjust Spending Habits
To begin rebuilding your credit, you will need to adjust your spending habits. You may have gotten into debt because of an unplanned expense or a significant purchase that went wrong – and now it’s time to get back on track.
After all, if you can’t manage how much money is coming in and going out of your bank account every month, what hope do you have to build up positive credit?
Start by creating a budget based on the amount of income you receive each month. Then make sure to stick with this plan as closely as possible. Even little purchases here and there can quickly add up over time – so try not making any unnecessary expenses for at least one full year after foreclosure.
By focusing on living within your means, you’ll be able to save money each month – which can then go towards purchases that will improve your credit score.
Continue To Pay Bills Regularly
Even if you are not making payments on your home, continue to pay all your other bills. This ensures that the companies do not report any missed payments to the credit bureaus.
If they do, it will appear as though you have stopped paying for everything else, too, which could negatively affect your ability to get new loans in the future.
Seek Assistance From Professionals
If you have been through a foreclosure, then you need to rebuild your credit. You can do this by reaching out to professionals who specialize in repairing the damage that has already been done and preventing future issues from arising as well.
In addition, these experts will be able to show you how to put together a plan of attack so that they can reduce the negative impact on your credit score over time.
Reduce Your Credit Balance
One of the easiest ways to improve your credit score is by reducing the amount you owe on all of your lines of credit. You can do this in one fell swoop or gradually over time, depending on whether you are comfortable having less available for use in case an emergency arises.
Use Or Get A Credit Card
If you can use credit cards, then you need to do so. This shows lenders that you can successfully manage debt and will reflect positively on your credit scores over time as long as you make the payments each month without fail.
Regularly Review Your Credit Report
A great way to ensure that your credit score is increasing over time and not declining further is by looking at the reports regularly. You can request free copies of them from each of the three major bureaus once per year, which you will want to use to keep track of what information they contain about your financial history.