How Long a Foreclosure Affects Your Credit

credit reporting agencies may report foreclosures in your credit reports for seven years, longer if you are seeking a loan for $150,000 or more. a foreclosure will cause a major decline in your credit scores. Te amount of that decline depends on the strength of your credit prior to the foreclosure. if you previously had excellent credit, your scores’ dip will be greater than if you already had a number of late payments, charged of accounts, or other negatives.

Despite a foreclosure, creditors may ofer you new credit much sooner than seven years, depending on the circumstances. For example, the Federal housing authority (Fha), the federal agency that encourages lending by insuring lenders against the risk that borrowers won’t repay home loans, will insure loans three years after a foreclosure, and in the case of “extenuating circumstances,” such as a serious illness or a death, it will insure them even sooner.

Fannie Mae is the quasi-federal agency that buys many private mortgages, so many lenders make loans based on its criteria. it has stricter criteria. Unless there are extenuating circumstances, it will only make loans seven years after a foreclosure. its defnition of “extenuating circumstances” is broader than the Fha’s, however. among others, it considers divorce, large medical bills, or a job layof as extenuating circumstances, if you can document the event and the impact on your fnances.

Te major impact of foreclosure on your life and your credit must be weighed against the constant struggle to make your mortgage payments, the risk of getting behind in those and other debt payments, and the possibility of going through foreclosure later. if shedding your mortgage allows you to start making your payments regularly and reducing your debt well below your credit limits sooner, it may help your credit recover sooner than if you continue to fall behind.

Source : http://whatisbusiness.in/