Have you experienced foreclosure? Whether recently or far in your past, you may wonder how long a foreclosure stays on your credit report. While a foreclosure does remain on your credit report for some time, that doesn’t mean it will never go away. The harm caused by foreclosure will diminish over time, and we’re here to help you navigate this challenging process.
What Is Foreclosure?
Foreclosure is the legal process that allows a lender to repossess a home to cover debts the homeowner owes. This process occurs when a mortgage is 120 days delinquent or when the borrower has missed four months of mortgage payments.
How Long Does a Foreclosure Stay on Your Credit Report?
A foreclosure record will remain on your credit report for seven years after your first missed payment date. After that period, the foreclosure should automatically fall off your reports.
A record of foreclosure on your credit report can have long-lasting adverse effects. It can hurt your credit score and impact your ability to obtain another loan. As a rule of thumb, you can expect a foreclosure to negatively impact your credit score by at least 100 points.
Can You Get a Foreclosure Removed From Your Credit Report?
After seven years, a foreclosure will automatically be removed from your credit score. Before that time limit is up, you’ll rarely be able to get rid of the foreclosure report. However, there are a few exceptions to this rule, such as:
- Your mortgage lender goes out of business – If a mortgage lender goes out of business, it’s possible that the foreclosure can be removed from your credit report. This process doesn’t happen automatically, so you’ll have to investigate for yourself. If your lender is no longer in business, you can request a review of your credit report.
- Voluntary dismissal of the case – If your lender voluntarily dismisses the foreclosure lawsuit, it can be removed from your credit report. This usually only happens when the homeowner can propose a voluntary foreclosure, also known as a deed in lieu of foreclosure (a homeowner voluntarily transfers the property title to the bank, releasing them from any further mortgage obligations).
- Lack of documentation – If there’s any information on your credit report that can’t be verified with supporting documentation, you can request it to be removed. You’ll file a dispute with the credit bureau, and they might consider removing the foreclosure.
Can You Improve Your Credit Score After Foreclosure?
Here’s the good news – you can take action and make efforts to improve your credit score even when a record of foreclosure is still on your credit report. We always recommend you start rehabilitating your credit score immediately so you won’t face as much trouble in the future.
Here are a few ways to help offset the negative mark from foreclosure on your credit score by stacking up positive data on the report:
- Pay all of your bills on time – Payment history is the biggest factor that will affect your credit score. Building up a long track record of on-time payments will help you look good to potential lenders in the future.
- Use 30% or less of your credit limits – Your credit limit use also significantly impacts your credit score. The lower your credit utilization, the better your credit will be. Always use less than 30% of your credit limits to be safe.
- Credit counselors – Many nonprofit organizations offer credit counseling or credit improvement services to help you reduce or eliminate debt and set you on a path toward healthier credit.
- Keep track of your credit – How will you know your credit score is improving if you don’t regularly check it? Stay on top of your credit by obtaining a free report from each credit bureau (Experian, TransUnion, and Equifax). You can do this once a year with no repercussions.
- Rebuild credit – Other ways to rebuild your credit include getting a secured credit card or credit-builder loan.
How Can You Avoid Foreclosure in the First Place?
If you’re worried you might face foreclosure, it’s best to take action right away. Here are some things you can do to prevent foreclosure and avoid the loss of your home:
- Be proactive – Don’t ignore the problem and hope that it will go away on its own, and don’t dodge calls or letters from your mortgage servicer. As soon as you know there’s a problem, reach out to your lender and see what can be done to resolve the situation.
- Reach out for help – There’s an array of free or low-cost counseling services available through the U.S. Department of Housing and Urban Development (HUD). A HUD-approved housing counselor can review your options, aid with getting your finances in order, and negotiate with lenders on your behalf.
- Research financial solutions – Some ways to avoid foreclosure include refinancing your mortgage, modifying the terms of your loan, or enrolling in a mortgage assistance program.
- File for bankruptcy – We know it’s scary, but filing for bankruptcy could solve your problems. Pursuing Chapter 13 Bankruptcy could allow you to catch up on missed payments and keep your home. Just keep in mind that bankruptcy can negatively impact your credit score.
- Contact Renewed Homes – Renewed Homes specializes in creative solutions, and we have arranged many sales where our clients can avoid foreclosure, build their credit back up, and receive cash on top of that.
Avoid Foreclosure With Renewed Homes
A foreclosure can severely affect your credit report, making it more challenging to do what you’d like and accomplish your goals in life. If you’re looking for a way to avoid foreclosure and save your credit, contact our team at Renewed Homes.
We specialize in unique solutions so you can stay in your home. If you’re facing foreclosure, we can pay your reinstatement fee on your behalf within 24 hours, bringing your mortgage current to avoid foreclosure! You’ll be able to stay in your home and won’t feel pressured to move or sell. Give our team a call today to learn more at 269.362.0931.
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