How does foreclosure effect my credit rating?
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How does foreclosure effect my credit rating?
Asked on March 9, 2011 under Real Estate Law, California
Answers:
M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney
Answered 13 years ago | Contributor
A foreclosure is one of the most credit-damaging notations that can appear on a credit report. It typically causes a credit score to drop by approximately 200 points; a fairly substantial decrease. Additionally, a foreclosure can remain on a credit report for 7 years. This can make obtaining a loan, or at least obtaining a loan for a lower interest rate, difficult if not impossible. The good news is that the negative impact of a foreclosure on a credit score diminishes over time. A FICO (credit) score can begin to go back up in as little as 2 years assuming that all other credit obligations are paid in a timely fashion. In fact, the FHA (Federal Housing Administration) will allow a new mortgage to be approved if a past foreclosure was more than 5 years old.
Note: A short sale or deed in lieu will have much the same effect on a credit score.
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