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If your home was foreclosed upon during the recent housing crash, you might think there’s no chance for you to ever own a home again. But that couldn’t be further from the truth. Although lending standards are tighter than they were pre-recession, there are still a few steps you can take to put yourself on the path to homeownership again.
The biggest hit you’ll take after a foreclosure is to your credit score. You may see a drop anywhere from 100 to 300 points depending on your credit history. But a foreclosure only stays on your credit report for seven years and there’s a lot you can do in that time to improve your score.
The first thing you’ll want to focus on after a foreclosure is rebuilding your credit.  There are lots of paid services out there that claim to boost your score. But there are many things those services do that you can actually do for yourself. Focus on paying all your bills on time to prove that you can be trusted with credit again.
Anytime there’s a negative action on your credit report (foreclosure, missed payment, etc.) your score is going to take a hit.  The seven-year waiting period should give you sufficient time though to take corrective action so that you’ll be prepared for homeownership the next time around.
In order to show lenders that they should lend to you again, it’s important to take small steps here and there. In addition to paying your bills on time, ensure that you pay off past-due accounts and pay off any outstanding credit card bills. It’s important to have a low utilization rate on your credit report. A utilization rate of 10% or less is what consumers with the highest credit scores have.
Things like lowering your utilization and opening new lines of credit that you can manage responsibly go a long way to show lenders you’ve learned from past mistakes. If you want to track your progress as you work on your credit, the free Credit Report Card gives you a monthly snapshot of your credit scores and credit history.
Although a single foreclosure won’t be devastating to your finances, you’ll want to ensure that it never happens again. Here are some things to focus on to avoid a future foreclosure.
Image: iStock
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