How Long Do Foreclosures Stay on a Credit Report? You Need to Know!
Foreclosures are serious life events that impact nearly every facet of your life. Not only do you lose your home, but you take a serious blow to your credit. Lenders frown on foreclosures and are less inclined to give you a loan, but the good news is that foreclosures can only stay on your credit report for a maximum of seven years. In the financial world, it’s called a mandatory waiting period. After that, they’re automatically discharged and won’t affect your credit.
Let’s check out some other useful info about how foreclosures affect your credit, like when you can get another mortgage, how to boost your credit after a foreclosure, and more.
When Does the Mandatory Waiting Period End?
The long, arduous seven years officially start from the date of your first missed payment, when your lender will report the missed payment to credit bureaus. After a second missed payment, that’s also reported to credit bureaus. Even pre-foreclosure can have drastic effects on your credit! The first two missed payments won’t drop your credit score as badly as a foreclosure, but they also go away after seven years.
How Much Does a Foreclosure Affect Your Credit Score?
Every credit bureau has its own way of assessing credit, so it’s hard to pin down exactly how much a foreclosure affects your credit. As a general rule, though, a higher credit score will drop more precipitously than a low credit score after a foreclosure.
If your credit was considered excellent before your foreclosure, it could drop as much as 200 points. Good credit scores fare better, dropping an average of 100 points. After seven years, the negative impact of the foreclosure will fall off. Other delinquent accounts may still affect your credit, so keep track of everything that can affect your credit.
Can You Get a Foreclosure Removed from Your Credit Report?
Before seven years, it takes a lengthy process to have a foreclosure removed from your credit report. You have to file a dispute with each of the major credit bureaus, who typically aren’t inclined to remove negative events from your credit report without good reason.
If the foreclosure was legitimate, chances are that you won’t be able to convince the credit bureaus to remove it. They have broad authority to reject what they deem as ‘frivolous’ disputes but may be able to help you under certain circumstances. These situations include:
- Foreclosure is still on your credit report after seven years
- A lender who foreclosed on your home is no longer in business
- There are no records of your foreclosure
How to Boost Credit Score After a Foreclosure
Although foreclosures can have a traumatic impact on your credit score for up to seven years, there are ways you can rebuild your credit and mitigate the damage caused by the foreclosure. Let’s take a quick look at some of the best ways you can repair your credit after a foreclosure.
- Keep up with your credit. Regularly check your credit reports and review credit cards, loans, and anything else that affects credit.
- Pay your bills on time. Foreclosures warn lenders that they can’t trust you to pay your debts, so paying all your bills on time afterward helps to rebuild your credit.
- Make eliminating debt a priority. Paying off debt boosts your credit and frees up cash that can be put to better use elsewhere.
- Avoid using credit cards. Above a 10% utilization ratio, using your credit card actually has a detrimental effect on your credit. Try to keep your balance under that magic 10% number to help heal your credit.
How Soon After a Foreclosure Can You Get Another Mortgage?
A foreclosure is possibly the worst thing you can have on your record if you want to get another mortgage in the future. In some cases, a foreclosure can completely freeze you out of the housing market for years. In others, you may be able to get a mortgage, but at an exorbitant interest rate.
How soon after foreclosure you can get a mortgage also depends on the loan’s backer; they all have different rules governing foreclosures.
Lastly, non-qualifying loans merit a special mention. These are loans that have higher interest rates, not to mention you’ll have to put more money down upfront. However, these are specifically designed to help people affected by foreclosures and those with poor credit. If all else fails, consider looking for a non-qualifying loan.
Foreclosures follow your credit like a specter for up to seven years unless you qualify for a special loan through the VA, USDA, or FHA. There are ways to slowly rebuild your credit afterward, though they’ll never cancel out the foreclosure.
Featured Image Credit: Andy Dean Photography, Shutterstock