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How Foreclosure Affects Your Credit

With rising home expenses, it is becoming difficult for home owners to pay their monthly mortgage payments. Due to this, many homes are going into foreclosure stage. The number that are hitting the foreclosure stage are increasing consistently due to this issue. In a study released by RealtyTrac, it indicates that the number of homes in foreclosure has risen by 58% in a one year period from 2007 to 2008. People with bad credit can be affected hard by foreclosure, the process will be described below.

The Process In Which Foreclosure Occurs

When home owners miss their mortgage payments, the lender will send a notice to the credit bureau. The greater number of payments you miss out, the more worse your credit rating will be, and you will have to pay certain fee\’s. When this occurs, the lender will file a Notice of Default (NOD) stating that you have defaulted on your payments. This is the official beginning of foreclosure process. This information, in some cases, will be published in certain local newspapers. This stage is referred to as the pre-foreclosure stage, at this point you still have hope. You can rake up some cash to pay the missed payments, or put the home for sale. You also have the option to refinance your mortgage (click this link for more information on mortgage refinancing). However, if you are totally stumped on money, and can\’t pay up anything, your home will be auctioned by your lenders or they will seize it. If your credit rating is poor, and you experience foreclosure wit will be extremely hard to get a mortgage refinancing. Foreclosure at this point will make everything just worse. The damage this will do to your credit rating is massive! Sometimes the rating can even fall below the 500 ball park. The foreclosure process will be in record for about seven years, and this will make it harder to obtain a loan or credit card. Bringing your credit rating up is difficult, but it will help to get you some kind of a loan or credit, although the expenses might be higher.

Long Run Damages This Does To Your Financial Status

When you do get a loan, it will come with a higher interest rate compared to someone who has the same loan, but better credit. This will apply to loans, credit cards, car loans & education loans. If you are planning on getting a certain insurance coverage or job, this can also prevent such an event.

Solution: The best solution is when you know its getting harder to pay off your mortgage, tell your lender about the situation. This way the lender can arrange a special deal with you to avoid foreclosure. Usually, the earlier you identify your problem to your lender, the better it is, and the more willing your lender would be to helping you.

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3 Responses to “How Foreclosure Affects Your Credit”

  • Mark CNo Gravatar says:

    I guess I will be refinancing soon. I was planning on this move for a while, I guess 2009 would be the right time for it.

    Mark C,

    Mark C’s last blog post..Chinatown Bus in Service For New York, Boston, Washington DC & Philadelphia

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