Category: Mortgage
Many people feel shocked when credit problems hit. In fact, facing foreclosure can feel just as painful as a physical blow.
But what happens next?
How will you handle your finances—or your credit—after a foreclosure or any major credit crisis?
Start by Strengthening Other Credit Accounts
The first piece of advice I give clients is this: Keep your other trade lines positive.
When you isolate a single negative event on your report, it hurts less. Lenders tend to overlook one issue if everything else looks strong.
Alternatives to Foreclosure Still Hurt Credit
Options like short sales and deeds-in-lieu of foreclosure may help you financially. However, from a credit perspective, they are still reported as “not paid as agreed.” Your credit score treats them the same as a foreclosure.
That doesn’t mean these aren’t good options. They might work better for your long-term finances. Just don’t expect your credit score to benefit either way.
Bankruptcy May Have a Bigger Impact
Some people consider bankruptcy to avoid foreclosure. But keep this in mind: bankruptcy usually affects more than one account. While a foreclosure involves just a single loan, bankruptcy can impact your entire credit history.
Because of that, bankruptcy often causes more damage to your credit score than foreclosure alone.