Improve Credit Scores After Foreclosure

Bankruptcies and foreclosures followed as a result of people neglecting capital and the interest rate on mortgages. Because the consumer’s payment history is one of the most important factors affecting the credit score calculation, a foreclosure was required to have a negative impact on the creditworthiness of the homeowner at that time. Therefore, the issue of improving credit score after foreclosure has gained a lot of importance.

A lender can initiate foreclosure proceedings and complete the entire process outside of the judiciary, provided the mortgage has an effect on the sales clause. In the absence of an effect on the sales clause, the lender has no choice but to take the borrower to court.

Legal foreclosure that can be expected

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In other words, is a legal foreclosure that can be expected. Regardless of the type of procedure, the information provided in the public records and credit report is for the consumer. The information remains firmly placed in the consumer’s credit report for a period of 7 years.

As previously mentioned, the consumer credit score decreases by 350 to 400 points as a result of a foreclosure sale. Although a debauched credit report and a low credit score is a double whammy, a number of creditors duly trust the consumer’s efforts to improve credit score. Good credit score is a must to get loans at a favorable interest rate, take advantage of insurance, and for that reason seek jobs that require the applicant to take the lead and financial responsibility.

Improve Credit Score Post Foreclosure

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To improve credit score after foreclosure, one should use either installment or credit facility and make it a habit to pay interest on a regular basis. Establishing a history of regular payments can go a long way to helping the consumer build his / her credit score. The same approach can be adopted by a consumer interested in improving credit score after bankruptcy.

Secured credit card
People can choose secure credit cards to rebuild credit, as consumers can be approved for these cards within 6 months of foreclosure sales or a bankruptcy discharge. These credit cards are secured by a CD that acts as a security for credit card companies. The credit is usually 50 to 100% of the amount of the deposit. A practice of repaying the full balance of the credit card on a monthly basis will result in credit card companies extending additional credit to consumers without any additional collateral deposits. A secure credit card may be converted into an insecure credit card within 18 months, provided the consumer is cautious with the payments. The net effect is the increase in credit utilization and a marked improvement in the credit rating for the consumer as a result of utilizing revolving credit.

FHA insured loans
People whose homes have foreclosed, have to wait for 3 years from the day of foreclosure sale to avail an FHA insured loan. Assuming the consumer is approved for a secured credit card and raises his / her credit score to 620 points, FHA insured loans can become the springboard for further credit score improvement. The Federal Housing Administration (FHA) gives the government insured mortgages that protect the lender in case the homeowner default on the installment. Thus, the consumer can use a mortgage by paying down only 3.5 percent of the home purchase price.

This installment loan is a fixed rate level payment mortgage

This installment loan is a fixed rate level payment mortgage

That does not require the borrower to pay the premium for private mortgage insurance (PMI).

These actions are not only useful for consumers interested in improving credit score after foreclosure, but also important for people who are keen to improve their credit rating after debt restructuring, as a debt restructuring does not completely eradicate criminal information from consumer credit reports. The net result is a good credit report and satisfactory credit score.

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