Life after Foreclosure

Posted on July 29, 2008
Filed Under Foreclosures |

Your life might never seem to end, while you are going through a foreclosure period. Your credit score report does get affected because of the foreclosure, but the good news is, that’s not the end of life. If you have lost your home due to the sub-prime reduce, there is a way you can recover from this quickly, which I will explain it to you. Obviously, for 7 years the negative mark that you get any time on your credit report will stay. But you can recover from it if you implement some good credit management steps.

You are not allowed to buy a house for up to 3 years from the date of foreclosure. The FHA and the conventional loans have a 3 year seasoning requirement, before they can approve the finance for you. But the positive side to this is to simply follow these steps below to improve your credit score.

Step 1: No Late payments.

Never delay you payments on any of your other obligations. Your credits will be destroyed due to any late payments.

Step 2: Maintain minimum Credits

Keep at least 3 lines of credits that are reporting on your credit report. For example, credit cards, secured credit cards, car loans and installment loans.

Step 3: Pay your Rentals on time

You should maintain an excellent rental history. You should never delay your payments to your landlord. Whenever you are ready, after 3 years, go ahead and buy a new home. Also your new mortgage payment must be very close to the rent that you are paying. That is because, whenever you are ready to buy a house, and the new mortgage payment is about $400 to $500 more than the rent that you are paying, then that will be considered as a payment shock by the bank. So be careful with that.

Step 4: Maintain good Savings

Have good savings in your account. You should be able to show at least 6 months worth of mortgage payments savings to the bank, so that they can confide in you.

Step 5: Learn from your previous mistakes.

After you have gone through the experience of a foreclosure, don’t let this happen again. Your credit mistakes will be forgiven by Fair Isaac, who is the creator of the FICO score, but the repeat offenders are not forgiven too well by the new FICO 08. So learn from your previous mistakes and never repeat them again.

During our little journey of life, on this earth, such things do happen sometimes. But by managing a good credit, we can make such things a lot better. There might come a time, when you are not very rich, when you need money and you have to borrow. And because of bad credit, it will get a little frustrating when you need a loan and you cannot get one. But you can have a very good credit health, if you follow and implement all the steps that I mentioned to you.