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If you lost your home due to foreclosure, overcoming the damage done to your credit and finances will be difficult. This page outlines some of the major steps you will have to take and is a general introduction on how to overcome foreclosure. You should consult a financial adviser for guidance.
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Disclaimer
The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.-
Introduction
- Overcoming foreclosure is a long process which can take years. While you might have to recover from the impact the foreclosure has on your state on mind, this page focuses on how to repair your credit and finances. Please use this page as a starting point for your research and make sure to consult a financial adviser for further guidance.
Step 1: Evaluate the Damage
- Ideally, the first thing to do after you lose a home because of foreclosure is to evaluate how the damage has affected your credit report and credit score.
- Request a free credit report.
- Federal law entitles people to request a free credit report through each of the three major credit report agencies Equifax, Experian and Transunion, once a year or due to specific circumstances. Visit AnnualCreditReport to do this.
- The same credit reporting agencies often also offer a free credit report if you sign up for a membership, which can be canceled before the term is over to avoid paying a fee.
- Carefully read the report and if you see any errors, report them to the agency.
- Consult Mahalo's guide on How to Get a Free Credit Report for more information.
Step 2: Rent an Apartment
- For many people who have lost a home due to foreclosure, finding a new place to live will the the first challenge. Your credit report and credit score will impact your ability to rent a home and the amount of deposit required.
- If a potential landlord is hesitant about renting an apartment due to your credit history and you had a good reason for the foreclosure, explaining it might help to get them to understand that you will not have difficulty paying your rent on time.
- If a landlord expresses concern about your credit history, explain how you will pay the rent on time each month and the funds that will help you to do so.
Step 3: Repair Your Credit
- To overcome foreclosure, you will need to repair your credit similar to people who have defaulted on their credit card payments.
- While you should generally and ideally avoid using credit cards for purchases, the reality is that you also need to repair your credit by building up a new and improved credit history. Use credit card sparingly and carefully.
- First, improve your credit score by paying of debt on current cards, if any, and by paying of their balance every month.
- If you want to apply for another credit card, the safest way is to apply for a secure credit card. To apply for a secure credit card, you need to first send a payment to start the account. The available credit line will be the same as the money you used to start the account.
- Be cautious of credit card offers which gives you 0% APR offers, as the APR usually suddenly increases dramatically when the 0% APR term is over.
- Fore more information, visit Mahalo's guide on How to Improve Your Bad Credit Score.
Step 4: Seek Assistance
- Even if you think you had a good reason and a unique circumstance that resulted in the foreclosure, you will benefit from meeting with a financial adviser. A financial adviser can teach you to better manage your finances and give you advice for your specific situation. This can help to improve your credit, make a budget and save money if you plan to purchase a house again in the future.
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