What is a foreclosure and how does it affect your credit? A foreclosure is the worst kind of credit report entries and will likely affect your future ability to get loans and credit cards.
Foreclosures are legal ways in which the bank can possess or mortgage property when the buyer fails to meet his or her contractual obligations. The most common cause is a failure to send payments on time or fail to send any payments. Once you enter foreclosure, it stays on your credit report for up to seven years.
The legal foreclosure process typically begins after you have been late on your mortgage for 120 days. After that, the time it takes to complete the process can vary, depending on the bank servicing your loan and where you live. This process is usually the last resort for a lender to obtain its payments. Once it is on your credit report, it remains there for seven years.
There are a variety of foreclosures. They include:
Judicial foreclosure. With this type, the lender must file a civil lawsuit in court, allowing the borrower to defend him or herself. Once it makes it on your credit report, a judicial foreclosure stays on your credit for seven years from the date of your first missed payment. After that, it will be automatically removed from your report.
Nonjudicial foreclosure. This does not involve the court. Instead steps are written out in a power of sale clause in the mortgage contract or deed of trust.
If you are facing foreclosure. You have options. It is in the lender's best interest to help you maintain the loan. You may be able to temporarily reduce or suspend payments with forbearance or refinance to a more affordable payment with loan modification.
If the foreclosure has already occurred, you have several options from removing the foreclosure from your credit report. For example, if the creditor is no longer in business, TCC can help you remove the foreclosure from your report.
Removing a foreclosure can be complicated and timely. An experienced credit repair company like TCC can help.