When you have big financial decisions looming, you may feel haunted by your credit history. American Credit can help with credit repair, so you can qualify for a home loan, buy a car, or increase your odds of being hired. A question our clients often have is, “How long does foreclosure stay on your credit?” Missing mortgage payments can hurt your credit significantly and affect your chances of approval for future loans. The answer to this question is therefore important to know and understand.
A Foreclosure Stays on Your Credit Report for 7 Years
That’s from the date of your first missed mortgage payment. Keep in mind you must miss several payments for a lender to take action. Lenders are often required to wait until a mortgage is 120 days delinquent. You must therefore miss four months of payments for the foreclosure process to begin, which adds damage to your credit on top of missing payments.
*A foreclosure is not guaranteed to disappear from your credit report after seven years. Mistakes can occur in the credit reporting process. If the derogatory mark doesn’t get taken off, you can dispute the error or try credit repair.
How Will Foreclosure Affect My Credit?
Just one missed payment can drop your FICO score by 100 points. But not everyone’s credit score is affected the same. FICO penalizes higher credit scores more than lower ones, so the higher it was before foreclosure, the more your credit score will drop and the longer it will take to bounce back. Another impact is that lenders may charge higher interest rates and add extra fees, so using credit will get more expensive.
Can I Rebuild My Credit If a Foreclosure Is Still on My Credit Report?
Yes, you can; and it’s a good idea to use the seven-year timeline to take positive steps. In the meantime, you can improve your credit score by:
- Paying your bills on time, as payment history is the most important metric used by credit scoring models. If you can only afford the minimum payment, make sure it’s submitted on time.
- Try to keep your credit utilization rate below 30%; using all of your credit limit makes you seem risky to lenders. Borrowers with the best credit scores keep their utilization below 10%.
- Create and stick to a budget to track your expenses, and enlist the help of a credit counseling agency for advice on reducing or eliminating your debt.
It also helps to check your credit often. Tracking your credit score and credit report provides insights into how your efforts are working. There are also other ways to rebuild your credit. These include using secured credit cards or applying for credit-builder loans.
When Is It Time for Credit Repair?
Foreclosures should not remain on your credit report after seven years. If you still have one on your report, one option is to file a dispute. The credit reporting agency must then investigate within 30 days. In theory, this should result in the removal of the negative mark from your credit report.
However, the dispute resolution process doesn’t always go as smoothly as it should. While most credit repair companies follow this process—for a fee—you can file a dispute on your own. Dispute resolution unfortunately has a low success rate. However, American Credit uses a pre-litigation process that consumer credit law attorneys follow, without the associated costs. This achieves a higher success rate as it forces creditors and reporting agencies to respond. After all, they prefer to avoid the costs of legal action.
Contact American Credit
If there’s a foreclosure on your credit report, and you are trying to qualify for a lease or mortgage, we can help. Our team will explain how lenders look at your credit. We will create a road map to improve your credit and can achieve results in as little as 60 days. To get started and receive a free comprehensive analysis of your situation, submit your request online or call 855-918-0908 today.