There are several things that could happen to your credit cards if your home is subjected to foreclosure proceedings. Usually, the terms and agreements that you had signed for your credit card accounts will provide you with a clue as to how the credit card companies may react to a foreclosure. Thus, it is often advisable to read the terms and agreements for the credit cards to have an idea as to what actions they will take before pushing through with a foreclosure.
One of the possibilities is that the credit card companies will cancel your credit cards if your property is under foreclosure. Another possibility is that the credit card companies may drastically lower your credit limit in such a way that a large portion of your credit will be wiped out. Another possible reaction by the credit card companies is to raise your interest rate, particularly if you have missed out on a number of payments.
Credit card companies may also evaluate your credit report a number of times throughout the year to determine if your credit rating has declined. Since this is most likely when your home undergoes foreclosure, they could apply the universal default clause that is often found in the terms and agreements of the credit card account.
When the credit card companies undertake any of the above actions in response to foreclosure, your credit score will decline further. This is because the amount of available credit for you is one of the factors that are used to compute your credit score.
My name is Maurice “Moe” Bedard. I am the founder of America’s #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.