How Long Does A Foreclosure Affect Your Credit Score?

Many people have questions about foreclosures these days. One of the many questions frequently being asked is how long does a foreclosure effect my credit score.

A foreclosure will definitely negatively affect credit scores and will also affect the person who has a foreclosure on their credit when it comes time to qualify for a new home loan.

The answer is a foreclosure, like any negative recorded credit, will remain on your credit report for 7 years. The 7 year rule applies to any derogatory credit, (late payments, charge offs) except for bankruptcy which will remain on a credit report for 10 years. So the answer is the foreclosure will negatively influence credit for at least 7 years. A foreclosure is a serious derogatory on a credit report and will affect the credit score more than other derogatory marks.

There is another impact a foreclosure will have on a person’s credit report and this will affect their ability to get another home loan. Most lenders will not consider a borrower who has a foreclosure on their credit reports qualified to borrow money for a new home for at least 2 years after the foreclosure has been discharged. This means that someone who has a foreclosure on their credit report in the past 2 years, no matter how qualified they currently are, will not, usually, be able to get a mortgage for a new home.

However there are some lenders who will disregard a foreclosure, or even a bankruptcy, a short time after the debts are discharged. The lenders who offer these programs usually charge much higher interest rates than those currently available, and commonly will charge points and fees on their loan programs; they do this to compensate for the extra risk involved with lending to someone who has a foreclosure or bankruptcy on their credit reports.

The smartest thing to do when facing foreclosure is to exhaust every option available to you in order to prevent going into foreclosure. A foreclosure on your record will have long lasting consequences and can affect a person’s ability to purchase a home, obtain new credit, or extend existing credit lines for years to come.