Start Rebuilding Your Credit After a Foreclosure
A foreclosure can drop your credit scores by at least 100 points. A foreclosure will remain on your credit report for 7 years. The good news is that a foreclosure is not the end of the world. Millions of people have gone through a home foreclosure and have perfect credit in a short period of time. Rebuilding your credit after a foreclosure takes some time. Even if you do not do anything after a foreclosure, your credit scores will naturally climb up and your credit scores will improve with passage of time. Rebuilding your credit after a foreclosure should be done as soon as possible. One important factor to remember is that you should not be late on any monthly payments after a foreclosure. Mortgage lenders really frown on late payments after a foreclosure.
Rebuilding Your Credit After a Foreclosure is Necessary to Qualify for a Home Loan
If you intend on purchasing a home again after a foreclosure, you need to start rebuilding your credit after a foreclosure. You should start by getting 3 secured credit cards. Each credit card should boost your credit score by at least 20 to 40 or more points. You should also try to get an auto loan or installment loan. Never be late on any monthly payments.
Authorized User on a Credit Card
Another way of rebuilding your credit after a foreclosure is to see if you can piggy back on a family member’s credit card as an authorized user. Make sure the credit card company of the family member will report authorized users to credit reporting agencies. It will serve no purpose of being an authorized user on a family member’s credit card to improve your credit scores and the credit card company does not report authorized users. The reason I mention this is because there are some credit card companies that only report spouses who are authorized users to credit reporting agencies and not other family members. Remember that the risk you inherit with being an authorized user on a family members credit card is that if the family member is late with a monthly payment, the late payment history will be reported on your credit report as well, thus dropping your credit scores and having a late payment record on your credit history.
Credit Scores Determines Mortgage Rates
Rebuilding your credit after a foreclosure is not all that difficult. Rebuilding your credit after a foreclosure does take time and patience. Remember that your credit score determines what mortgage rate you get, how much you pay in insurance premiums, and can be a factor in you getting a job or promotion. Many companies in the United States run credit checks as part of their hiring and promotion process. All mortgage loan originators in the United States have to submit to annual credit background checks in order to validate their mortgage licenses. A very poor credit score signals employers that the individual is not financially responsible. However, we all know that there are periods of people’s lives that having perfect credit all the time is not possible. There are extraordinary circumstances that happen like job loss, medical problems, and divorce that cause financial hardships.