How Long Does a Foreclosure Affect My Credit Score?

Foreclosures are hard on your financial prospects in more ways than one. Not only does it drop your credit score, but having a foreclosure on your record will force you to pay higher interest rates for most loans—often 1.5% to 2% more, unless you can put down a sizable down payment of 20% or more. It also disqualifies you from homeownership for at least 3 years; the wait is even longer for non-FHA loans.

Even more bad news about foreclosures and credit scores: the better your credit score, the worse your foreclosure will impact your credit. For people with excellent credit (780 range), your credit would likely drop to 640 to 620. If your credit is in the 680 range, you're looking at a drop of 600 to 570.

However, there is hope:

Foreclosures don't remain on your credit report indefinitely. The foreclosure will remain on your credit report for 7 years past the date of filing, plus 180 days past the day the last payment was made on the account. Your personal records re: the foreclosure will differ from the public record—the date of your foreclosure on public record is the day the foreclosure was filed at the courthouse.

Thankfully, the impact of the foreclosure will lessen over time, even before the foreclosure is removed from your record.

What Other Damage Does a Foreclosure Cause?

Unfortunately, the presence of the foreclosure will continue to affect your other prospects—even after your financial situation improves. Employers can legally weed out candidates with low credit scores, and insurance companies can set higher rates for people with poor credit. Utility companies might demand large security deposits from people with poor credit as well.

There's no way to get a foreclosure removed from your record early—unless there's a lack of available records or a mistake was made in handling your paperwork. Lenders have been known to make mistakes regarding foreclosures, and some have even had to pay for damages to former homeowners. Additionally, banks that close down or are bought by other banks create a hurricane of paperwork, making the "existence" of your foreclosure questionable.

If the bank listed on your credit report is no longer in business, you may want to hire a lawyer to see if you can get the foreclosure removed. The lack of paperwork may save you from years of financial difficulty.

Find a foreclosure attorney here!