{"id":27,"date":"2010-11-30T16:32:22","date_gmt":"2010-11-30T16:32:22","guid":{"rendered":"http:\/\/lakeandhomes.com\/blog\/?p=27"},"modified":"2010-12-08T14:30:21","modified_gmt":"2010-12-08T14:30:21","slug":"rebuild_credit_after_foreclosure","status":"publish","type":"post","link":"https:\/\/lakeandhomes.com\/blog\/rebuild_credit_after_foreclosure\/","title":{"rendered":"5 Strategies to Rebuild Your Credit after Foreclosure"},"content":{"rendered":"

\"\"<\/a><\/p>\n

This is a reprint from RISMEDIA, November 30, 2010\u2014(MCT)\u2014<\/p>\n

If you\u2019ve been through a foreclosure, you may wonder if there is hope for you to become a homeowner again. The answer is yes, but it will take a while. \u201cIt doesn\u2019t mean you\u2019ll never be a homeowner again,\u201d said Linda Davis-Demas, director of housing at Consumer Credit Counseling Service of Greater Dallas.<\/p>\n

But you\u2019ll need to examine what caused you to fall behind on your mortgage and take steps to fix the problem. \u201cYou have to look at what were the reasons you didn\u2019t make the payment,\u201d said Davis-Demas. \u201cWas it budgeting? You can modify that type of behavior.\u201d<\/p>\n

A foreclosure is a major hit to your credit history and stays on your credit report for seven years.<\/p>\n

\u201cForeclosure is one of the FICO seven deadlies,\u201d said credit expert John Ulzheimer, referring to the dominant FICO credit score. \u201cIt\u2019s considered a major derogatory item, regardless of the back story\u201d\u2014 whether it\u2019s a job loss, rate reset, underemployment or other reasons.<\/p>\n

Your credit score will also suffer \u201cthe minute the foreclosure process begins,\u201d said Ulzheimer, founder of 2StepCredit.com, a credit education website. \u201cIt doesn\u2019t have to be completed for it to be very damaging,\u201d he said. \u201cThe damage will vary based on your scores, but it can damage the score as much as 200 points, especially if your scores are very strong to begin with.\u201d<\/p>\n

So, after a foreclosure, your priority has to be rebuilding your credit. You\u2019ll have some time to do so, because mortgage giants Fannie Mae and Freddie Mac impose strict rules on how long it will take before you\u2019re eligible for another mortgage.<\/p>\n

For example, borrowers with a prior foreclosure and extenuating circumstances\u2014such as a job loss, divorce or medical issues\u2014must wait three years before they can qualify for a Fannie Mae-backed loan, said spokeswoman Amy Bonitatibus. For all other borrowers, the waiting period is seven years.<\/p>\n

At Freddie Mac, those who can prove extenuating circumstances must wait three years before applying for a new mortgage; everyone else must wait five years. But that will change in February, when the waiting period for those whose foreclosure was caused by their own financial mismanagement will increase to seven years.<\/p>\n

Fannie Mae and Freddie Mac also have strict rules on the credit score and the size of the down payment required of borrowers with a prior foreclosure.<\/p>\n

Here\u2019s what you need to do to rebuild your credit to qualify again for a mortgage: <\/strong><\/p>\n

Pay your bills on time: <\/strong>The FICO score, the dominant credit score used by lenders, gives the greatest weight to payment history, so make sure you consistently pay your bills on time. \u201cStability is the key,\u201d said Craig Jarrell, president of the Dallas region of IberiaBank Mortgage Co. \u201cHave you demonstrated that you are now capable of owning a home and paying the bills, and have recovered from whatever circumstance caused the original foreclosure?\u201d<\/p>\n

Review your credit report: <\/strong>You\u2019re entitled to a free credit report once every 12 months from each of the three national credit bureaus\u2014Experian, TransUnion and Equifax. You should get a copy and check it for any inaccuracies.<\/p>\n

To get your free credit report, go to http:\/\/www.annualcreditreport.com<\/a>. \u201cMake sure it is about you and only you,\u201d said Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. \u201cIf you find errors, dispute them. If you discover old debts, it will weigh in your favor to satisfy them. Paid late looks better than not paid at all. Make sure that debts older than seven years have rotated off your report, as these could be dragging your score down unnecessarily.\u201d<\/p>\n

Check your mortgage:<\/strong> You want to be sure that you don\u2019t still owe anything on your old mortgage. Sometimes proceeds from a foreclosure sale aren\u2019t enough to cover what\u2019s owed on the mortgage, which would leave you owing the difference.<\/p>\n

\u201cMake sure there is a zero balance reflected, and if you are responsible for a shortfall, make arrangements to repay the remaining balance,\u201d Cunningham said.<\/p>\n

Many lenders are willing to settle that \u201cdeficiency judgment\u201d for less than what\u2019s owed because \u201cit\u2019s better than getting no money at all,\u201d Jarrell said.<\/p>\n

Apply for credit: <\/strong>In particular, apply for different varieties of credit. \u201cCredit scoring models value having different types of credit,\u201d Cunningham said. \u201cHaving some revolving accounts, typically credit cards, and some installment fixed-payment loans, such as a car payment, can improve your score.\u201d But don\u2019t apply for too much credit at once. \u201cThis can appear as though you\u2019re desperate for credit and perhaps make lenders less inclined to extend credit to you,\u201d Cunningham said. \u201cFurther, too many credit inquiries can have a negative impact on your credit score.\u201d<\/p>\n

Don\u2019t fall prey:<\/strong> Watch out for credit repair companies that promise to clean up your credit report so you can get a car loan, a home mortgage, insurance, or even a job\u2014after paying a fee for the service. \u201cThe truth is, that no one can remove accurate, negative information from your credit report,\u201d according to the Federal Trade Commission. \u201cIt\u2019s illegal.\u201d Only the passage of time can assure that negative, but accurate, information on your credit report will be removed.<\/p>\n

When it comes to repairing your credit, there are no quick fixes, the experts say. What lenders want to see is responsible financial behavior over time.<\/p>\n

\u201cKnow that time is your friend, as the farther you move away from the financial distress, the less negative impact it has,\u201d Cunningham said. \u201cFollow with responsible behavior with your new credit, and you\u2019ll soon have a solid credit file.\u201d<\/p>\n

(c) 2010, The Dallas Morning News.<\/p>","protected":false},"excerpt":{"rendered":"

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