You know that a foreclosure on your home can be a big deal when it comes to your credit. But how big of a deal can it be? You might be surprised at how much a foreclosure can impact your credit, and how long it can take to recover, depending on the situation.
The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.
Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
They kept the house through the bankruptcy and started working to recover their financial situation. However, the market crash of 2008 meant that home values plummeted. Suddenly (and especially after putting in thousands for renovations), Ms. X and her husband were stuck in a home that wasn’t worth what they were paying for it.
“After finding out we were expecting our third child, we realized that we’d never bounce back if we stayed in an underwater home,” Ms. X says. “We started the short sale or foreclosure process.”
Source: Secondary
Why foreclosure can be so devastating
Foreclosure can be so devastating because it is related to your payment history. Your payment history is the largest factor affecting your credit score. Before your home goes into foreclosure, there is a good chance that you have missed at least three payments. By the time the foreclosure process is complete, you might have missed even more payments. All of these missed payments are recorded in your credit history and affect your credit score.The more payments you miss, and the more “important” those accounts are, the bigger the impact on your score. If your score is 680 and you go through a foreclosure, you could see a drop of 85 to 105 points in your score. A higher score, of 780, could result in a drop of between 140 and 160 points.
Combining foreclosure with another problem, such as a short sale or a bankruptcy on your record, can be even more devastating and result in more difficulty as you attempt to recover your score.
Short sales and your credit
Ms. X, the financial writer behind A Matter of Life or Debt, and her husband found out the hard way that a near-foreclosure resulting in a short sale can be just as debilitating to a credit situation. They bought a home in 2007, just before the bottom fell out from the market. Even though the couple filed for bankruptcy in 2008, Ms. X says the short sale process hurt them more.They kept the house through the bankruptcy and started working to recover their financial situation. However, the market crash of 2008 meant that home values plummeted. Suddenly (and especially after putting in thousands for renovations), Ms. X and her husband were stuck in a home that wasn’t worth what they were paying for it.
“After finding out we were expecting our third child, we realized that we’d never bounce back if we stayed in an underwater home,” Ms. X says. “We started the short sale or foreclosure process.”
Source: Secondary
See i have not missed any EMI so far in my consumer durable loan, i have 5 emis pending, if i foreclose (by paying all the emi in advance) does it reduce my cibil score OR Increase my cibil score
ReplyDeleteThank you for sharing! It is really worth sharing and I'm glad that it helps me get personal loan emi with out credit card from Early salary app & it is great.
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