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 You've had a foreclosure or a short sale on your
property. Now what? It's
time to start rebuilding your credit.
"Though you may be relieved to have finally resolved your housing
situation, don't put it out of your mind just yet." writes Stephanie Taylor
Christensen on Mintlife. You need to follow through and know the terms of how
your finances were resolved.
"When it comes to foreclosures and short sales, no two agreements are
alike;" says Christensen, 'the terms and conditions have different impacts
on credit scores, how they are reported to the credit bureaus, and how long
they take to fall off."
A short sale,
where the lender allows you to sell the house for less money than you owe and
then may or may not forgive the rest, has always seemed to be the best of the
options. However, a FICO study showed
that there wasn't that much of a difference between the foreclosure and short
sales regarding the end result to your credit score.
What did matter,
interestingly enough, was your original score. Higher FICO scores showed the
greatest impact and took longer to rebound.
"Time is critical in rebuilding credit worthiness: a short sale with
no deficiency balance will generally require at least three years before the
credit score will increase." writes Christensen. "In the case of a foreclosure, the borrower
must wait for at least seven years, and in some cases, up to ten, if a
bankruptcy filing was involved."
Credit cards will be the key to
rebuilding your credit score. Start by requesting your credit report
from a free credit reporting agency. You are allowed one free report each
year. Check for errors and report them
to the credit bureaus.
Start paying down your credit
cards. Christensen reports that 30 percent of
your FICO score is based on debt-to-income ratio. Set up automatic bill pay to avoid late or
missed payments and "don't attempt to
raise your credit score by closing open credit lines." advises Christensen. "Know that removing the credit availability
might actually hurt your score more after a short-sale or foreclosure, when
access to new credit will be limited. (To potential lenders, closing the
credit, even if you haven't used it in years, makes it appear as though you are
closer to being "maxed out" than you really are)."
No credit lines at all after the
foreclosure? Apply for a secured credit
card to rebuild your credit. A secured card requires you to deposit funds
in the bank to "secure" your credit limit on the card. Your credit limit is based on the amount you
deposit. Using this card responsibly
will show the lender that eventually you will be a good candidate for unsecured
credit again.
Christensen states that it will take
patience and time to rebuild your credit. Most bad items will drop off your credit
score in 7 years. "If you manage other accounts responsibly while you
wait, you should be in good shape by the time the foreclosure disappears from
your credit report."
Read the full story at MintLife.com
 photo credit: sovietmole
Posted on August 04, 2011 10:52:55 by  IPTV.Boyz
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