This is becoming a more and more common question with homeowners who are worried about their credit scores. People are getting faced with many economic difficulties these days, and sometimes, they are faced with the choice of what bills to pay and which ones to put on hold. If you put your mortgage payment on hold for too long, then a foreclosure might be in your future.
But exactly how badly does a foreclosure affect a person’s credit rating?
A foreclosure usually lowers a person’s credit score by 200-300 points. So, if you had a great credit score of 850 before your foreclosure, then having your home go back to the bank could lower your score to the mid 500-600’s, which would make it pretty low by industry standards. But that is not the only way that foreclosure can hurt your credit.
Usually when you have suffered a foreclosure, you cannot get any credit towards almost anything for up to 24 months after. That means that you cannot buy a new car, buy a new home, or take out a loan for anything until this time period has gone by and your credit is restored. If you do find firms who will issue you credit, it will be at very high interest rates with incredibly tough terms.
Foreclosure should be the last answer if you are worried about affecting your pristine credit rating or having trouble making your mortgage payments. But in the end, many people must make a choice between paying an unaffordable mortgage to protect their FICO scores or maintaining their sanity by stop paying on loan that is going to fail anyway.