How to Remove a Foreclosure from Your Credit Report

Credit

Despite reported upswings in the housing market, foreclosures continue to be a big problem for residents of the US.

lady reading documents

No matter the circumstances that put you there, dealing 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, 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?

Once you fall behind on your monthly mortgage payments by at least 120 days, your lender will begin foreclosure proceedings on your home. After the proceedings begin, the mortgage lender will usually report the foreclosure to the three major credit bureaus; Equifax, Experian, and TransUnion.

The foreclosure will usually show up on your credit reports within 30-60 days. A foreclosure stays on your credit report for seven years. 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. But, even if you deem a listing on your credit report as “questionable,” you can dispute it. The burden of proof is on whoever reported the item on your credit history.

Another common reason to have them removed is a lack of available records. This most often occurs when the bank that owned the mortgage loan 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 mortgages 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 report that the credit bureau cannot verify must be removed.

How can I remove a foreclosure on my credit report?

If you would like to try the removal process of your foreclosure on your own 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 credit reports in hand from Equifax, Experian, and TransUnion, look at each 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 the same. There are three separate credit reporting agencies that compile information in different ways. Check each one for inaccurate information.

If you find an error concerning the foreclosure, you can file a dispute with all three credit bureaus. First, 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. Request that they remove the entry from your credit report due to inaccuracies and 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 a foreclosure from your credit report requires filing separate disputes with all three credit bureaus.

Because of how credit reporting agencies work, you have to word your disputes carefully to avoid having them 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 you can provide. This is one of the reasons that many people hire a credit repair company when it comes to repairing their credit and removing foreclosures from their credit reports.

If you have a foreclosure on your credit report, we highly recommend working with a credit repair company like Lexington Law. We believe that their professionals will give you the best chance of 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 credit report. If your credit score 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. In addition, you may also see the interest rates on your current credit cards rise due to the drop.

How does a short sale affect your credit?

In the past, you could reduce the damage of foreclosures 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 score 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 seven years as well.

What are some other ways that foreclosures can cost you?

Many people don’t realize the different ways your credit score 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 credit 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 usually weed out people with a poor credit score as a potential risk for nonpayment of rent. Unfortunately, this can make it almost impossible to qualify for 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. But, unfortunately, many people don’t realize that out until they’re already in the process of looking for 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.

Foreclosure Removed from Credit Report

foreclosure removed from TransUnion

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Lauren Ward
Meet the author

Lauren is a Crediful writer whose aim is to give readers the financial tools they need to reach their own goals in life. She has written on personal finance issues for over six years and holds a Bachelor's degree in Japanese from Georgetown University.