How Foreclosure Will Affect Your Credit

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Foreclosure affects everyone’s credit in a negative manner there is no need to pretend that it will not have an adverse effect. There are serious events in life that can cause a foreclosure to happen which are unavoidable at times. Many of these events are unavoidable and often are unexpected some of these events are things such as a sudden death, divorce or sickness.

Some things that cause foreclosure that you can control is uncontrollable spending and not spending your salary wisely. It is very important that you take control of how you spend your income today because tomorrow you may find that this great salary no longer exists. The economy of today has caused many a lucrative business to close doors or cut down majorly on the amount of employee’s. When you find yourself unemployed then it is too late to panic. We are not advocating that you panic now but that if you are a compulsive spender that you take control of your spending habits. You should create a budget for yourself and your family that includes a savings for emergencies whenever they might arrive.

You should take a look at the type of mortgage that you currently have or if you are planning on making a mortgage for a home check it out before signing. The adjustable interest rate mortgages are not very good for most people. It has become a proven fact that within three to five years people find themselves in the position of having to go through with a foreclosure when they have an adjustable interest rate mortgage. It is very advisable for you to keep a check on your payments if you have an adjustable interest rate loan. You might be able to re mortgage your home with a set rate which would help prevent you from going into a foreclosure status.

When an event happens that is unexpected such as loss of employment, death or divorce you do have three months of missed payments before the bank will set a default against you. After you have received the default notice you normally maybe allowed another three months before the bank takes repossession of your home. This does not sound very enlightening but it does give you some major time to be able to come up with a payment. You might be able to consult with the bank concerning your circumstances and make arrangements on your payment to prevent foreclosure.

After you are served with notice of foreclosure remember this does not stop any fee’s, payments due or interest charges. When your property is auctioned-off if the full amount of what you owe is not recovered your name still goes in to the credit bureaus lowering your credit score. The final result your creditor can put an attachment against your IRS return and claim any resulting funds that you might be expecting from the government. A foreclosure can do damage to your credit and cause you to be making payments for years to come.

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