LOS ANGELES, UNITED STATES, March 9, 2018 /EINPresswire.com/ — Nobody wants to give away his house but what if reality hits on you and you have to give it away in a Foreclosure? It will not only render you homeless but also affect your future. Want to know how can a foreclosure affect your credit report?
Read the article to know what impact can a Foreclosure have on your future especially concerning your credit score….
There are a lot of troubles which come along with a foreclosure. Some of them are mentioned below:
• Tax problems
Foreclosure leads to title transfer, and one must understand that selling a house will be followed by tax implications. If the bank sells off the property at a lesser value than the mortgage loan amount and cancels the difference amount, then this amount is considered as income and tax has to be paid on it. An exception is when the debts are discharged through bankruptcy in which case it is non-taxable. Consider consulting a tax professional to get advice on your situation.
• Buying another home
It will take some time for the lenders to decide and lend you a loan if you have recently given your previous home to foreclosure as it is a risk for them too.
• Applying for a financial job
Sometimes if you are applying for a new financial job, you are required to have an explanation ready as to why you had to give away your home in a foreclosure and how has it impacted your money-management skills.
Impact of a Foreclosure on the Credit Score
The main impact this article talks about is on the credit score which is affected a lot by a Foreclosure.
First, what is a credit score?
It is a 3-digit number which represents how likely a person is to repay his or her debt. It is based on an analysis of a person’s credit files and history to decide his creditworthiness. It is used by a lender to decide whether to give loan and if yes at what rate of interest and with how much limit. The higher the score, the more attractive is the borrower, and the easier he gets a loan. Obviously, everyone will try to keep the credit score high but what if you are faced with a Foreclosure?
Foreclosure may have long-term credit score implications:
• If you lose your home in a foreclosure, your credit score may go down by 250 to 280 points.
• Foreclosure starts to appear on the credit report after 90 days of delinquency (30 days in some states).
• It can take about 3 years minimum to restore the credit score and be able to get a new mortgage with lesser terms and conditions and at a lower interest rate. But this too will require consistent, on-time payment of credit.
• A credit report is looked by the lenders to provide loan and a mention of a foreclosure on the credit report is looked as very negative. It may not be as bad a bankruptcy but of course, losing your house is close to it.
• Mention of foreclosure on the credit report will make it difficult to get new credit and that too at best rates.
• It stays on the credit report for 7 years and hence will have a long-term implication on the creditworthiness.
Can the credit score be rebuilt?
Although foreclosure has a lot of negative impact on the credit score, it is not the end of the world. A credit score can still be rebuilt with time and patience if you keep a check on your debt and try and build a history of positive payments which will be there even when the foreclosure is removed eventually.
So, even if you are experiencing hard times and had to give away your home in Foreclosure, don’t worry and take heart as the damage is not permanent. It does have a negative impact on your credit report, but it can be rebuilt with time and patience with the help of good credit behavior.
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Source: EIN Presswire