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Tips on Rebuilding Your Credit After Foreclosure

By Tiffany Raiford

Since the economic downturn of 2008, a growing number of individuals and families have lost their homes to foreclosure. What this means is many things, but it means more than anything that your credit score takes a big hit and it's difficult to bounce back from that. Once your credit score is affected, it's difficult to find the kind of backing needed to obtain a new loan or even a lease for a new home or rental. You need to know what to do to build your credit back after this happens to you.

Know What You're Facing

With a foreclosure on your credit report, you're looking at a good seven years before you can really begin to rebuild your credit. Additionally, the higher your score was when your home was foreclosed upon, the longer it will take to build your score back up. This means that you'll spend the next seven years working hard to rebuild your credit to what it was. To add to that, if you added in a bankruptcy at the same time as your foreclosure, the time frame is closer to 10 years than it is to seven to rebuild your credit to a respectable number.

Work at It

The good and bad news is that you can work on your credit to help improve your credit score. While it might take seven or more years to do this, you can make all your future payments on time, keep your debt to income ratio low, and work hard to perfect your credit report so that it shows no late or missed payments. However, it's still going to take you as many as seven years to rebuild. No amount of on time payments can erase the black mark caused by a foreclosure.

Be Smart

The mistake so many people make is taking on too much debt after their score begins to rise. The point of raising your credit score is to get it back to a comfortable level. This does not mean you get to apply for numerous credit cards the second your score reaches a better level. This means you have to live below your means and make good financial decisions for the remainder of your life.

Foreclosure is a big deal on your credit report, and it's not going to just go away because you want it to. It takes years to rebuild your credit and it's not something you can do overnight. Be patient, work hard and make the most of what you have right now to help improve your score.

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