How to Improve Your Credit Score After a Foreclosure

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A foreclosure occurs when you fail to make your mortgage payments and a lender takes ownership of your home. A foreclosure can cause your credit scores to drop dramatically, but it's possible to bounce back from one.

After your home is foreclosed upon, you can immediately start taking steps to restore your credit. To improve your credit after a foreclosure, you may need to overhaul your credit and debt habits so your credit report will reflect only positive information going forward.

How Does a Foreclosure Affect Your Credit?

Because a foreclosure record tells creditors you weren't able to make your mortgage payments, it has an extremely negative effect on your credit. So, just how much can a foreclosure impact your credit score? It depends on where your credit stood before the event.

The higher your credit score was beforehand, the more significant the impact will be. The foreclosure will remain on your credit history for seven years after the date of your first missed mortgage payment before it drops off naturally.

Rebuilding Credit After a Foreclosure

While rebuilding credit after a foreclosure takes time and commitment, it's not impossible. By taking the following steps, you can recover from the situation and position yourself as a responsible borrower.

  1. Identify the cause of your foreclosure. Before you attempt to rebuild your credit, figure out what led to your foreclosure in the first place. Dive deep into your finances and spending history so you can find out what caused you to miss your mortgage payments.
    Did a major event such as job loss or divorce play a role? Or, did you make purchases you really couldn't afford? Be honest with yourself and try to recognize where you may have overspent, spent unwisely or failed to plan for emergency expenses. Once you know the problem, work to correct it and you can prevent another loan default.
  2. Pay your bills on time. Make it a top priority to pay all your bills on time. Timely payments on your credit cards, car loans, utilities and other bills can play the biggest factor in your credit score and can help prevent foreclosure from completely ruining your credit. If you often forget to pay your bills, set up calendar reminders or sign up for automatic payments.
  3. Make a budget and stick to it. It's easy to forget about the long-term impacts of going through the coffee drive-thru line every morning, buying the newest smartphone and frequently traveling abroad. Without proper budgeting, these actions can put you in a cycle of debt and worsen your credit score, rather than help it. Take the time to create a budget (and stick to it). This can help you live within your means and avoid debt.
  4. Get a secured credit card. Foreclosure may prevent you from getting approved for a traditional credit card. If this is the case, apply for a secured credit card. Secured credit cards will require a deposit and generally have a spending limit that matches your deposit, but are attainable by consumers whose credit has been dinged by foreclosure. Making timely payments on a secured credit card can have a noticeable positive impact on your credit. Pay it off in full each month to avoid interest and to prevent debt from ballooning.
  5. Keep an eye on your credit utilization ratio. This ratio measures your total credit card debt against your total credit limit. A ratio above 30% can hurt your credit scores, so aim to keep it below that—but the lower, the better. Your credit utilization ratio is the second-most important factor in your credit scores, so keeping it low tends to have a positive impact.
  6. Seek a professional's help. You don't have to create a budget or figure out how to reduce your debt on your own. A professional such as a credit counselor can help you design the ideal solution for your unique situation. They may also negotiate with creditors to lower your interest rates and monthly payments. To find a reputable credit counselor, look for a nonprofit organization certified by the National Foundation for Credit Counseling or the Financial Counseling Association of America.
  7. Check your credit scores and reports regularly. To monitor your progress, it's a good idea to check your credit scores and reports on a regular basis. You can request a free credit report from each of the credit bureaus (Experian, TransUnion and Equifax) once a year by going to or check your Experian credit report for free every 30 days. Doing so can give you an idea of the specific factors impacting your credit score and how to address them. It can also motivate you to stay on track with your rebuilding efforts.
  8. Be patient. There's no denying that repairing your credit score after foreclosure takes some time. Be patient and don't expect instant results. Just remember that with time and diligence, you can turn your dream of an improved credit score into a reality.

You Can Improve Your Credit Score After a Foreclosure

All hope isn't lost after a foreclosure. These tips can help you rebuild your credit score and improve your financial situation. With hard work and dedication, you can recover from a foreclosure and achieve your short-term and long-term goals.

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