What is Foreclosure?
Foreclosure is a legal process that can occur if the homeowner fails to keep up with their mortgage payments, which gives the lender the right to seize the house to recover what is owed to them. However, before starting the foreclosure process, lenders must wait until the homeowner has missed at least four monthly mortgage payments, at which time the mortgage is 120 days delinquent.
In addition to the loss of the home, foreclosure can have negative effects on the homeowner’s credit and ability to secure a new loan. According to Experian, missing three or four mortgage payments by itself can decrease credit scores by at least 100 points. And foreclosure could have credit scores plummet even lower.
How a Foreclosure Affects Your Credit Report
A foreclosure can severely damage your credit report. The missed payments that led to the foreclosure can cause significant negative effects on your credit score, and the foreclosure itself can have your credit score dropping tremendously. According to the Consumer Financial Protection Bureau (CFPB), foreclosure can stay on your credit report for seven years from the date of the first missed mortgage payment that started the foreclosure.
While a foreclosure can have significant negative consequences to your credit, remember that the impact on your credit score doesn’t have to last forever and you can rebuild your credit for another mortgage application. Nonetheless, it’s always wise to track your credit score recovery with Experian’s free credit monitoring service before you apply for any loan to know where you stand.
The Law Office of Todd Cushner & Associates handles foreclosure cases and is ready to help in any way we can. Contact us at 914-600-5502.
