Going through a foreclosure can be hard – both emotionally and financially. It’s difficult to have to move out of your home. However, the situation doesn’t have to have long-lasting effects on your financial life. There are steps you can take to repair your credit score and get back into a new home.
What Is a Foreclosure?
A foreclosure happens when a homeowner gets behind on their mortgage payments and the home is repossessed and seized by the lender. According to CNBC, “Bank repossessions jumped 66 percent year over year in the third quarter of [2015].”
Foreclosures happen for a variety of reasons such as job loss and other financial hardships. As if losing your home isn’t bad enough, a foreclosure also affects your credit.
After the bank repossess the home, the owner can freeze their credit report. Frozen credit is a way for people to control how the credit bureaus are able to see and use their personal and financial information. The freeze locks the data at the bureau until an individual gives permission for its release. It’s one way to prevent lenders from seeing the negative effects of a foreclosure until you’ve take the necessary steps to rebuild your creditworthiness.
How to Rebuild Your Credit
A foreclosure is a temporary setback, but don’t let it get you down. You can rebuild your credit. Make sure all other accounts such as credit cards, loans and lines of credit are in good standing. Utilities such as your electric bill and cell phone are reported on your credit bureau. It’s important to make sure all bills are paid in full and on time each month in order to help rebuild your credit.
Can You Buy Another Home If You Have a Foreclosure?
The answer is yes. Once the foreclosure is over and you’ve taken the necessary steps to rebuild your credit, homeownership can once again be in your future.
The first step is to contact one of the three credit bureaus (Equifax, TransUnion and Experian) to order a copy of your credit report and obtain your score. You will see how all of your personal and financial information is being reported and you can make any necessary corrections.
The second step is to contact a lender and get a mortgage pre-approval. They’ll evaluate your current financial situation and credit worthiness to determine how much they’re willing to approve for a mortgage loan. From there you can start shopping for your next home.
If you’ve experienced a foreclosure and are ready to buy your next home contact a professional. They’ll help find the best loan option for your needs.
Photo source: Pixabay
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