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How does a house in foreclosure affect your credit?

In: Personal Finance, Debt and Bankruptcy, Debt Collection, Foreclosure, Money Management, Credit [Edit categories]

Answer:

If you allow your home to be foreclosed or if you sign a Deed-in-Lieu of Foreclosure. Home owners will take a hit of about 250 points on their FICO score. This means if a their FICO score before foreclosure was 680, it could dip as low as 430. A home owner who wants to buy another home after foreclosure will end up waiting about 24 months before a lender will offer any kind of interest rate that makes sense. During that time you must have a near perfect credit.

The affect of a short sale on a home owner's credit report is much less damaging. The negative on credit may show up as a pre-foreclosure in redemption status, which will result in a loss of around 80 points from the FICO score. It can also simply show up as the loan was paid off and not affect your score at all. This means a short sale with a previous FICO of 680 could possibly see it fall to around 600 or it could remain the same.

There are actually companies that will work with you for free to buy your mortgage away from your mortgage company and avoid your foreclosure. I would advise looking into this first.

First answer by ID1659116881. Last edit by ID1659116881. Question popularity: 3 [recommend question].

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