There are many reasons for people to have bad credit. A negative credit report could result from late payments, unpaid collection accounts such as utility and medical bills, tax liens and foreclosure. In this article, let us discuss how to repair your bad credit due to foreclosure. Foreclosure is a legal process by which an owner's right to a property is terminated, usually due to payments. It typically involves a forced sale of the property at a public auction, the proceeds of which will be applied to the mortgage debt.
For homeowners, foreclosure is a setback financially. However, it is not the end of the world or your credit. A foreclosure will remain on your credit report for seven years and is a bad credit' only for the initial few years. It is so because, as the foreclosure gets older, you add more positives to your credit report and thus your credit will improve.
The following are some of the alternatives that could be resorted to repair a bad credit after foreclosure:
Evaluate the cause of foreclosure
This is the first and foremost step to be adhered to repair a bad credit after a foreclosure. This includes proper understanding of the reasons that would have resulted led to defaulting payments and a study of the possibilities to prevent a foreclosure. Asking questions to yourself on what could have been done differently to correct defaulting payments, will help you to prevent it from happening again.
If you are a spendthrift, it high time to stop and start making plans about budgeting your income. Setting a budget will enable you in handling the financial responsibilities in a smarter way and will also help you to repair your bad credit post foreclosure
Continue paying your bills on time
Continuing to pay all your monthly bills on time will have a positive effect on your credit ratings. If practiced, a creditor who manually reviews your credit score will find that mortgage was the only item that had led to a decline in your credit scores and will consider passing your loan application. This is definitely an easy way to repair your bad credit post foreclosure.
Negotiate removal of negative items with your creditors
Though a foreclosure stays on your credit report for upto seven years, you can always negotiate with your creditors to remove other items by negotiating the payment terms. You can propose to offer a lump sum payoff in return, get the agreement done in writing (as the agency may not keep its promise) and thus remove all the negative information.
Review your credit report
Review your credit report frequently to ensure its accuracy. You can get a free credit report from Experian, Transunion and Equifax. It will help you to report the harmful errors, if any for a Fair Credit Reporting Act forces the bureaus to erase the errors if the creditor cannot confirm the information within thirty days.
Do not open new accounts
If you attempt to open a new account soon after your foreclosure, your application will be rejected and multiple inquiries will be made within a short period, which will ultimately harm all your credit repair efforts.
Keep yourself away from the financial distress, it will keep you less troubled and will help you repair your bad credit at the earliest.
Knowing time is your friend, as farther you move away from the financial distress, the less negative impact it has and you will soon repair your bad credit.