The Truth of Credit

Recovering from foreclosure can be daunting. But as bad as it seems all is not lost. By starting to re-build your credit today you should be able to purchase another home in a short amount of time sometimes within a year. You will pay a higher interest rate ( Bankrate.com) but you can rejoin the ranks of home ownership. If you wait 2 years, you may even qualify for an FHA loan, which carries a completive interest rate. So what will your credit look like?

The “foreclosure” on your credit report will have a dramatic effect on your scores. Sometimes they can cost you in the neighborhood of 200 points or more. The strangest part is that the only why to improve your credit is to use credit (as stupid as that sounds).

Here are some steps you can use to re-establish your credit:

Step 1 - Pay more than the minimum every month if you can. (I know duh!)

Step 2- Always pay one week before the due date. This literally forces you to budget and when you need that those last couple days you’ll have time to move money around.

Step 3 - Keep your balances at 35% or lower of the credit limit of any credit cards. I know easier said than done. This is something to shoot for. You are no longer paying a mortgage and hopefully you are rent is fairly reasonable.

Step 4 -A great part of your credit score is made up of the ratio of credit you use compared to the limit of credit you have available. If you close a credit card with a $5,000 credit limit for example, you reduce the available credit you have by $5,000 which increases your utilization ratio, which lowers your credit score.

The TRUTH is nobody likes losing there home but don’t lose your mind. You will make it back this is a small blimp in your credit history. Maybe you can be the inspiration for people losing their homes like you did. By then you should be an expert.

Steps to Recovery

If you enjoyed this post, make sure you subscribe to my RSS feed!