A foreclosure is a legal process by which a mortgage lender takes possession and ownership of a borrower’s home because the borrower cannot make the mortgage payments. A foreclosure can have a major negative impact on your credit history.
How does a foreclosure affect your credit history?
According to Experian, the higher your credit score was before the foreclosure occurred, the more significant the impact will be. A foreclosure remains on your credit history for seven years after the date of your first missed mortgage payment before it drops off naturally. However, it’s possible to bounce back from a foreclosure and start taking steps to restore your credit.
If you’ve recently gone through a foreclosure, here are five ways you can start rebuilding your credit:
Check your credit report.
Monitoring your credit report—especially now—is important to ensuring your credit history is accurate. You can get a free copy of your credit report from each of the three major credit reporting bureaus—Equifax, Experian and TransUnion—at AnnualCreditReport.com. If there are errors found on your credit report, disputing them may help improve your credit.
Pay your bills on time, if possible.
Making on-time payments is one of the most effective ways to rebuild your credit. Even if you can only pay the minimum balance, do your best to stay on top of your monthly payments.
Get a co-signer.
A co-signer may be brought on as an additional repayment source for a loan, enabling you to obtain financing terms you might not otherwise be able to obtain. However, before you get a co-signer, you both should understand that the co-signer is responsible for the amount owed if you don’t pay.
Keep your credit balances low.
Although having a credit card is good for establishing credit history, credit agencies such as Experian advise keeping your use of credit to no more than 30 percent of your total credit limit.
If you’re looking to purchase a vehicle, financing is available.
If you’re in the market to purchase a vehicle, subprime financing is available to consumers with bad credit or no credit. Car dealers enrolled in the Credit Acceptance auto finance program can approve you for financing regardless of your credit history. And, since we report to the three major credit bureaus, you have an opportunity to improve your credit history by making on-time car payments.
If you are taking steps to rebuild your credit and are in the market to purchase a vehicle, a dealer enrolled in the Credit Acceptance program can help. Simply fill out the form on our website to start your credit approval today!