| If you have experienced a foreclosure, you know | | | | probably late with other payments as well. |
| what it's like to leave your home, pick up the pieces, | | | | For example, if after experiencing foreclosure your |
| and make a fresh start. After losing your home, you | | | | FICO Score is between 600 and 640, you will expect |
| have probably resolved to work hard and earn enough | | | | to pay at least 1.625% over the prevailing interest rate. |
| income to get another mortgage after foreclosure. | | | | This means if a borrower with good credit pays 6.5%, |
| Good! You deserve another shot at the American | | | | your interest rate might be 8.125%. |
| Dream. But you may wonder about your credit score. | | | | If your current credit score is 500, then you should |
| You know that potential lenders will consider your | | | | expect to pay proportionately more or as much as |
| credit rating and you are concerned that by going | | | | 3.875% over the prevailing interest rate. The ironclad |
| through foreclosure you have permanently damaged | | | | rule of borrowing is that the lower your credit score, |
| your chances. You wonder how long after foreclosure | | | | the more you pay. It's that simple. |
| you can purchase a home. | | | | For How Many Years Is My Credit Affected? |
| What Is a Credit Score? | | | | The Fair Credit Reporting Act (FCRA) is the federal |
| If you are thinking about buying a home after | | | | law that regulates consumer credit information; there |
| foreclosure, you first need to understand what your | | | | are also state laws. Generally, credit reports cover |
| credit score is and how it may factor into a lender's | | | | activity within the past seven years, after which time |
| decision. | | | | the information is removed. The exception? A |
| Your credit history includes all of your credit activities | | | | bankruptcy, which stays on your credit report for ten |
| including credit cards, store charge cards, your auto | | | | years. |
| and home loan, and student loans. In order to assess | | | | There are no hard and fast rules about how long it |
| your creditworthiness, most lenders use the credit | | | | takes to get a mortgage and purchase a home after |
| score system designed by the Fair Isaac Corporation | | | | foreclosure. In addition to your credit score, lenders |
| (FICO). It is a sophisticated credit-scoring formula that | | | | consider other factors including your employment |
| compiles your credit history and evaluates the risk that | | | | history and current salary, your debt-to-income ratio, |
| you may default on a loan. | | | | and your savings. Generally, the lower your FICO |
| FICO scores range between 300 and 850. The better | | | | score, the higher loan interest you will pay and the |
| your credit history, the higher your score. A score | | | | more documentation the lender will require. Homeloans |
| below 620 is typically considered "sub-prime." "Good" is | | | | for people after foreclosure are possible, but you need |
| 620 to 650, and above 720 is seen as "excellent." | | | | to be willing to pay more and provide evidence of your |
| According to FICO the median score is 723. | | | | creditworthiness. |
| A home loan default and foreclosure is a major credit | | | | Monitor your credit score! With a foreclosure on your |
| event. Some experts believe that a foreclosure will | | | | record, you don't need the extra burden of erroneous |
| result in an immediate 250-point drop in your FICO | | | | information dragging down your FICO rating. According |
| score, and that it will take at least 24 months of | | | | to the Fair Credit Reporting Act, every twelve months |
| perfect credit before a lender will consider you for a | | | | you have free access to your credit report from each |
| reasonable loan rate. A short sale (where your lender | | | | of the three nationwide reporting agencies (Experian, |
| agrees to a sale of your house at a loss) may be less | | | | Equifax, and Trans Union). When you request your |
| damaging. | | | | credit report, be sure to ask for both a credit report |
| One factor impacting your credit score after | | | | and a credit score. And don't be afraid to walk into |
| foreclosure is how high your credit score was before | | | | your local bank and talk to a loan officer-you may be |
| the foreclosure. Unfortunately, your credit score | | | | pleasantly surprised. It may take less time than you |
| probably wasn't that terrific because you were | | | | think to purchase a home after foreclosure. |