Despite reported upswings in the housing market, foreclosures continue to be a huge problem for residents of the US. In April 2018, 1 in every 2,058 homes in the US received a foreclosure filing.
The RealtyTrac database lists over 588,000 homes that are currently in foreclosure. That’s well over half a million families struggling with the devastation of losing their homes.
No matter the circumstances that put you there, having to deal with a foreclosure is one of the most stressful situations anyone can imagine. The stress of losing a home is only compounded by the damage foreclosures do to your ability to get back on your feet after a financial setback.
After the foreclosure is over with, the consequences continue in the form of poor credit and higher costs for everything from loans to insurance – and that’s assuming you can still qualify.
How long does a foreclosure stay on your credit report?
A foreclosure stays on your credit report for seven years. That means it will negatively affect your credit for 7 years, but less and less as time goes on.
Can a foreclosure be removed from your credit report?
Yes, it is possible to have a foreclosure removed from your credit reports. The mistakes made by lenders have been well documented in foreclosure cases, with some banks even having to pay restitution to people whose foreclosures were mismanaged.
Many errors have occurred in foreclosure cases, including the “rubber stamping” of foreclosure documents and lack of proper procedure. For reasons such as those, it may be possible to have your foreclosure permanently removed.
Another common reason to have them removed is a lack of available records. This most often occurs when the bank who owned the mortgage is no longer in business.
In many instances, mortgages and foreclosures were sold from one bank to the next, leaving a snarl of paperwork that made it impossible for people to pay their mortgage bills on time.
These sales also made it difficult for some banks to keep accurate records, and if the bank listed on your credit report is no longer in business, they will not be able to verify the foreclosure. Any information on your credit file that cannot be verified must be removed.
How can I remove a foreclosure on my credit report?
If you want to try and DIY the removal process for your foreclosure before you contact a professional, there are two methods to use.
Step 1: Find Errors on the Credit Report Listing
Once you have copies of your three reports in hand from Equifax, Experian, and TransUnion, look at each and every detail of the foreclosure entries. If any of that information is incorrect, you can dispute it. Check the foreclosure balance, any dates associated with the account, your account number, and the name of your lender.
Another big mistake to avoid?
Don’t assume that all three entries are exactly the same. There are three separate credit reporting agencies that compile information in different ways. Check each one for those for inaccurate information.
If you do find an error in relation to the foreclosure, you can dispute it across all three. Send a dispute letter and you should receive a response within 30 days. Within that time frame, the credit bureaus need to verify the information within the entry and correct it, or ideally, remove it altogether.
Step 2: Write to the Lender
Another tactic you can take if the credit bureaus won’t remove the foreclosure is to write directly to the lender. Simply request that they remove the entry from your credit report due to inaccuracies and also give them a 30-day deadline.
If they can’t verify, or just don’t want to spend the time doing so, they might remove it altogether.
Step 3: Get Profesional Credit Repair Help
Removing foreclosures requires filing separate disputes with all three credit bureaus.
Because of the way the credit bureaus work, you have to word your disputes carefully to avoid having it deemed “frivolous.” While the Fair Credit Reporting Act (FCRA) offers protections for consumers, credit bureaus have the right to ignore anyone that they feel is abusing the law.
The credit bureaus decide whether or not a dispute is frivolous solely based on your communication and any proof that you can provide. This is one of the reasons that many people look for professional assistance when it comes to repairing their credit and removing foreclosures from your credit reports.
If you have a foreclosure on your credit report, we highly recommend working with Lexington Law. We believe that their professionals will give you the best chance at getting it removed.
How does a foreclosure affect your credit?
You can expect to lose anywhere from 85-160 points on your credit score when the foreclosure first hits your reports. If your credit was good to start with, expect a much sharper drop than if your credit was already poor or average.
In most cases, you will not be able to qualify for a new credit card, auto loan, or mortgage immediately after a foreclosure. You may also see the interest rates on your current credit cards rise as a result of the drop.
How does a short sale affect your credit?
In the past, the damage of foreclosures could be reduced by completing a short sale or a deed-in-lieu of foreclosure rather than going through with an “official” foreclosure proceeding. However, the credit bureaus have since started penalizing all three of these situations identically.
The only potential benefit to a short sale or deed-in-lieu is the possibility of qualifying for a new mortgage shortly thereafter. However, the negative impact on your credit may make this impossible.
Can I buy a house after foreclosure?
As far as buying a new house after foreclosure, you won’t be able to qualify for a new mortgage for at least 2 years and possibly longer. This is the case even if you have the financial means to pay for a less expensive home.
Once you do qualify for a mortgage, expect to have to pay more in interest and fees. Additionally, you’ll most likely be expected to put a much higher amount towards the down payment – somewhere in the area of 20% or more.
How long does a short sale stay on your credit report?
As mentioned above, short sales aren’t treated any differently from foreclosures, so they will remain for 7 years as well.
What are some other ways that foreclosures can cost you?
Many people don’t realize the different ways your credit impacts your everyday life. Along with access to loans or credit cards, your credit score is often used:
- As part of the hiring process – to weed out candidates with low scores
- To set insurance rates – to charge higher rates for poor credit or to disqualify people entirely
- To get approval for utilities – to charge hefty deposit fees to establish service
- For other services – for services such as cable and internet, you may not even qualify for service if your credit score is too low
It is also very common for landlords to run a credit check when screening potential renters.
Landlords immediately weed out people with poor credit as a potential risk for nonpayment of rent. This can make it almost impossible to find a good home or apartment in a safe neighborhood.
Having a foreclosure on your credit report can make it even harder to find a place to live. Many people don’t find that out until they’re already in the process of trying to find a home or an apartment.
Large deposits will likely be required to establish necessities such as electricity, water, and garbage collection, which makes it even more difficult to start over and begin rebuilding your life after foreclosure.
Lexington Law Helped This Client Get His Foreclosure Deleted:
This client’s credit scores have dramatically improved since there are no longer any negative accounts on his credit report. Here is a snapshot of his scores since signing up:
Other Client Testimonials:
You’ll never guess, I just got approved for a home loan with a 5% interest rate! And no points! And I refinanced my car! YOU GUYS ROCK!— P.J., Lexington client
This is just to tell you how pleased I am with the service your organization has provided for me. My credit was a mess before we started and they really have taken shape. My client advocate has been extremely helpful. I will definitely recommend your services to others.— R.S., Lexington client
Discount for Family Members, Couples, and Active Military!
Lexington Law is now offering $50 off the initial set-up fee when you and your spouse or family members sign up together. The one-time $50.00 discount will be automatically applied to both you and your spouse’s first payment.
Active military members also qualify for a one-time $50 discount off the initial fee.