Credit Repair Articles

How To Rebuild Credit After A Foreclosure

Credit Repair Articles - Foreclosure

If you have a foreclosure on your credit report, it is going to hurt your credit score, and probably a lot.

At first, the damage to your score will be worse, and after a couple of years it should be less. Most credit scoring in based on the last 2 years of credit history. It doesn't mean that older items won't still hurt your credit—they will, but what it means is that as a negative item ages, it will tend to affect your credit score less and less.

There are steps you can take that will improve your chances of getting a better score as the foreclosure on your credit report ages.

In this article we'll cover those steps.

Step 1 - Be A Clean Freak

The first thing that you absolutely have to do when you have a "serious" negative item such as a foreclosure or bankruptcy on your credit report is this:

KEEP YOUR CREDIT CLEAN.

I'm not talking about past credit either. We'll talk about that in a minute. But for now what I'm talking about is that for now and into the future, you need to NOT mess up your credit any worse than it is.

That means:

  • You should not have a single late pay.
  • You should not have a single new collection account or charge off.
  • You should not have 40 hard inquiries on your credit report.
  • Your credit report, in terms of new negative items appearing after the foreclosure, should be SPOTLESS.

You've got to be a clean freak, period.

Step 2 - Work on fixing other items on your credit report.

If there are other items on your credit report with incorrect reporting, you should work on correcting or removing those.

The less you have holding you down, the better.

This step is as simple as getting copies of all three of your credit reports from the bureaus, and looking for incorrect reporting. Dispute based on any incorrect reporting you find.

Remember that if your disputes are based on FACT, you are more likely to eventually have success at removing or correcting the items being disputed.

Step 3 - Add new positive accounts to your credit report.

The next step is simple. You begin the process of rebuilding your credit by adding new primary accounts to your credit report, and building a positive credit history on those accounts.

How can you add new accounts and positive payment history to your credit report?

There are several ways.

  • You can use sub-prime merchandise cards.
  • You can use a sub-prime Visa or MasterCard.
  • You can use a secured Visa or MasterCard.
  • If there is an old account on your credit report that was in good standing but now closed, you can call the lender and try to get it re-opened.

Once you've opened up a couple of new accounts, you start making charges and making payments, and rebuilding a positive credit history.

After a while of doing this, you will start becoming eligible for credit line increases and offers for better credit cards and accounts.

Once these start showing up, you can selectively apply for offers (NOT all the time, and NOT all of them), and eventually you will get approved for a better card with a better credit line and a better interest rate.

Step 4 - Last but not least, take a serious look at the foreclosure itself.

It seems like everyone always wants to try REMOVING the foreclosure itself, and you can too, but you should know that it's difficult to do and there is a strong chance you will not succeed.

Some people will succeed at removing the foreclosure of course, but it's not something you can count on or plan on. So following this plan by working on the other items while taking steps to rebuild your credit is a good idea, even if you think you want to try to get the foreclosure itself removed.

And for removing the foreclosure itself, the first step you will have to take is to analyze the foreclosure process and paperwork closely. Did the bank mess up? Was the law followed exactly? Were there shortcuts taken? Finding the answers to these questions is a good start to the process of removing the foreclosure from your credit report.

Some Final Thoughts

Obviously, the best way to deal with a foreclosure is to avoid it in the first place if you can. For those who can't avoid foreclosure or who have already been foreclosed on, there is still hope if you are careful with your credit and you follow the steps I've just described.

As you work on rebuilding your credit, I strongly advise you analyze how and why you got into the situation you are in, and take steps to prevent the same thing from happening again in the future.

Did you buy a home that was too expensive?

Did you choose a loan with terms that were destined to hurt you in the end?

Looking at the big picture this way can do a lot for you in the long run, and it's a good exercise to undertake during the process of rebuilding credit (while your past mistakes are still fresh on your mind!)

 


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