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How bad does foreclosure hurt a credit rating? This is a common question nowadays. A foreclosure can drastically affect your credit rating and should only be considered as a last resort. It is rumored that foreclosure can affect your credit score by between 200 to 300 points. This means if you have an excellent score of 800 then it will reduce your score to 500 which is considered as a negative credit score.
It mandates that a creditor not provide any financing to you for 24 months following the foreclosure. This limit goes towards not only home financing but any kind of credit. So you won’t be able to buy a car, take out college loans, or even finance something as small as a computer. It can also affect your ability to find an apartment because landlords use your credit score as a means of determining how reliable you will be as a tenant. The same can be said about trying to get a phone number or cable as they will also run your credit to determine your credibility.
The good news is that the harmful effects of foreclosure can begin to reverse after the 24-month period has passed. The foreclosure will not be completely removed from your record until after seven years; Although some lenders will offer you financing for smaller loans after two. You can expect to be able to buy a home again from some lenders after about five years; You will of course be assessed a very high interest rate though. If you choose to finance a home with a higher interest rate, assuming you have a steady payment history, you will be able to refinance the home after the foreclosure closes off your credit report.
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