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Will a foreclosure affect your credit score?

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By: Kedy
on 25th Oct,2013

Many events will happen throughout the course of your lifetime, some of which can affect your credit score.
Will a foreclosure affect your credit score?

Many events will happen throughout the course of your lifetime, some of which can affect your credit score. For example, you may lose your job and struggle to pay your mortgage on time. As a result, you may face serious financial difficulties and even the foreclosure of your home. Although these events can be devastating, there are ways to turn around your credit score rating over time. Knowing how to check your credit score and maintain a good score are essential for a good financial standing.

How To Check Your Credit Score And Report

The first step towards ensuring financial stability is to perform a check on your credit report and score. In doing so, you can see where you currently stand and make note of ways in which you can improve your score. A seriously low score can affect your ability to buy a house or a car. Ideally you want a score that is in the upper 600s or the 700s if these goals are in your future.

Fortunately, there are many ways in which you can check your credit score and report. Due to the Fair Credit Reporting Act, your score is updated on an annual basis. You should access your credit report often and always check it thoroughly for any inaccuracies. If you find any information that is inaccurate or not a line of credit you opened, you need to immediately take action so that the credit bureaus and the different financial institutions involved can take steps to catch the person(s) responsible.

How Foreclosure Affects Your Credit

It is true that a foreclosure does have a negative impact on your credit score. Since payment history is one of the most important factors that is considered for the score, any payments that are late or missing can have a negative impact. If you fell behind on your payments, your credit history may show that you have a long-standing history of missed payments instead of any of the reasons behind the late payments.

You should know how foreclosure affects your credit and ways in which you can redeem your score. However, you can potentially avoid the situation by seeking assistance from a professional such as a bankruptcy lawyer or a CPA who focuses on bankruptcy provisions. It is important to be aware of which lender you ultimately choose, as some have more lenient policies than others. Some mortgage lenders are known to allow a missed payment now and again if you stay in communication with them when a situation drastically affects your life, while others will start foreclosure proceedings the week of your first late payment. In addition, some lenders may opt to take greater risk, which could harm your financial score.

Achieving And Maintaining A Good Credit Score

Whether you are a young professional who is just starting to accumulate a credit history or an older adult who wants to improve or maintain a good score, there are several suggestions available. For example, you should start by limiting your applications to credit that you genuinely need instead of applying to anyone who may open you a line of credit for something you simply desire. Some of the most vital components of a good score is paying off bills in full on a consistent basis and avoiding coming too close to your allotted credit limit.

A good credit score can have a large impact on your daily life. This is true whether you have a low score, which can hurt your chances of buying a house or a car, or you have a solid score, which can make that process easier. Of course, it is much easier to maintain a good credit score and history than to try to build up your financial reputation after a hardship, such as foreclosure. Be aware of factors that positively affect your credit score, such as paying bills on time, to help achieve and maintain a solid score. The longer your credit history shows these positive habits, the better you will look in the eyes of financial institutions when you need them most.

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