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How Does a Foreclosure Appear on My Credit?

House foreclosure California

A foreclosure will usually appear on your credit report within 30 to 60 days of the lender starting the foreclosure proceedings. It will show up as a foreclosure, with the expected drop in score. And it will stay on your report for seven years.

If you do end up with a foreclosure, whenever a potential lender checks your credit, they will see this black mark on your credit. And you can expect them to treat you as someone who has failed to meet an important borrower’s agreement.

Those who have gone through seven years of this kind of difficulty often regret not having found a way to get cash for the home and being able to avoid foreclosure and all of the lasting negativity that comes along with it.

The great news is that’s there’s a smart and simple solution. We are here to help.

Our team is always happy to discuss how we can help you get a great, fast cash offer for your home so you can get moving in the right direction again. The biggest part of that is keeping a foreclosure off of your credit report.

How Does Foreclosure Affect My Credit?

There is nothing that will hurt your credit score as much as a foreclosure. If you experience a foreclosure expect your credit score to drop by at least 100 points (if you already have poor credit) and all the way up to well over 160 points (if you had good credit at the time of your foreclosure). This is really a negative hit of an epic scale. Experts universally agree, if you can avoid a foreclosure on a home, you absolutely should.

Here’s an easy example. Let’s say you have a credit score of 700. This is considered “Good” and leaves open most loans, credit cards, the ability to get in a new car or good apartment, and other common lifestyle needs. A foreclosure would likely drop your credit score to around 550 (or maybe even lower). This brings you into the “Very Poor” range, where you can expect all of these opportunities, and many more, to be closed. For many, many years, as we’ve discussed previously.

With a foreclosure potentially approaching, fast, you can see why being able to sell a home for cash can be a lifesaver. For many reasons, including preserving your credit score.

Can the Bank Seize My Assets in My Foreclosure?

When the bank forecloses, they reclaim and sell your home in order to repay your loan. Of course, if the amount of money owed is more than what the sale of the foreclosure bring in you will owe the remainder, which is called the “deficiency.”

What options are available to the lender to try to recover these funds can vary by state and circumstance. In some states all options are open, including garnishing paychecks and having bank accounts seized. While in other states, like California, there’s significant protections if the foreclosed property can be shown to have been a home, where the borrower lived. In those cases, the lender cannot pursue more aggressive means to attempt to recover whatever the “deficiency” may be. This kind of homeowner protection can end up being quite valuable after a foreclosure if it is available.

Finding out which of these situations applies if you should face foreclosure shouldn’t be difficult to determine. But remember, knowledge is power in these circumstances, so the sooner you know the better. It can help you make a more informed decision.

Is it Possible to Have Multiple Foreclosures on Your Credit?

While it may be extremely difficult to get a new mortgage with a foreclosure on your record, it is possible. The terms will likely be extremely poor, something that would hardly be setting up most people for success. With all that said you can end up making payments on another home while you have a foreclosure, and if you end up not being able to meet your obligations, you can expect to be caught up in the whole process again. This will mean another seven years until the second foreclosure leaves your credit report.

For nearly anyone not getting a first foreclosure, by doing something like selling your home for cash before the bank or lender acts is a much better strategy. This will make not having to worry about a second foreclosure not an issue.

If you do have one on your record already, certainly do what you can to avoid the second. Or you are looking at seven more years of destroyed credit.

Can Foreclosure be Removed From my Credit?

This is an important question, because we all know (or should know) how much foreclosure can negatively impact credit. Plus, a bad credit score (which you can expect after a foreclosure) can close door after door to your life.

So, here’s the unfortunate answer. After a foreclosure on a home, you can expect it to appear on your credit score for a full seven years.

There’s no way to get around this. This makes it clear why a service like ours – where you can sell a home fast for cash before a foreclosure – can be extremely valuable. We can prevent a foreclosure, bad credit and closed doors.

Remember, there’s no way the credit report bureaus are going to ignore something as significant as a foreclosure when it comes to determining your credit score. A foreclosure is considered EXTREMELY serious.

The best way to protect against a foreclosure is to not experience one. Avoiding foreclosure will allow you to continue to rebuild your life using the credit you have already established. You do not need to wait 7 years to get a fresh start.

 

Can the Government Foreclose?

While bank foreclosures are more common, the government can and does foreclose on properties every day. This can happen due to many different reasons. The good news is that it is not likely to be a surprise. If you fall into one of the categories that would put your home under risk, you most likely will know it.

 Probably the most common is from the IRS who can seize and foreclose on homes to pursue unpaid taxes. But the IRS is far from alone. There’s also HUD (The Department of Housing and Urban Development) who can and will go after mortgages that are behind, along with the VA (The Department of Veterans Affairs), and the FHA (Federal Housing Administration). Dealing with each agency can be quite different, but ultimately if you are behind, don’t be shocked if you are notified that they intend to foreclose unless you take quick action to either sell the home or somehow get back in good standing. Some cities and counties can also foreclose. If you are behind on your property taxes and are owed to a local municipality, they can foreclose to collect those taxes. You could even (eventually) lose your home for code violations!

A little bit of good news in this area, is that the Covid-19 pandemic has bought many families more time to find a solution, although these protections are expected to not last for much longer.

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