A foreclosure can drop your credit score by 85 to160 points, CNN Money staff writer Les Christie warns. This can mean the difference between getting credit and being rejected. You might even have trouble renting a home because many landlords review credit reports. You can start fixing your credit immediately after a foreclosure to offset the damage.
Step 1
Pay your remaining bills on time every month. You can make the most headway in fixing your credit score by concentrating on the factors that count the most. Credit score company FICO cites payment history as the most important factor, influencing 35 percent of your score.
Step 2
Pay more than the minimum payment amount on your credit cards and other revolving accounts, FICO advises. Creditors are leery of people with past credit problems who maintain high balances on unsecured accounts. Reducing these amounts will help fix your credit.
Step 3
Don't open new accounts. You will probably be rejected several times before being able to open a new account after your foreclosure. Multiple inquiries within a short period of time will harm your credit repair efforts, as will increasing your available credit if you are able to get an account.
Step 4
Negotiate removal of negative items with your creditors. A foreclosure stays on your credit report for seven years, but you might be able to erase other items by negotiating payment terms, the Military Money financial site explains. This can be done with creditors or collection agencies. Offer a lump sum payoff in exchange for removal of the negative information. Get the agreement in writing before paying or the creditor or agency might not keep its promise.
Step 5
Review your credit report to ensure its accuracy. According to the Federal Trade Commission, you can order a no-cost credit report from Experian, TransUnion and Equifax every year through annualcreditreport.com. You have the right to dispute harmful errors, and the Fair Credit Reporting Act forces the bureaus to erase them if the information cannot be confirmed by the creditor.
Tips and Warnings
- Do not fall for advertisements promising to remove a foreclosure from your credit report, the FTC warns. It will stay on your report for seven years, and there is no shortcut for taking it off early. You will pay a high fee and get nothing for the money.
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