REPAIR CREDIT SCORE AFTER FORECLOCURE

Foreclosure can be very destructive for your credit score.

It is like a time bomb that big black spot showing on your credit report which can 
drastically bring down your credit score by 100-200 points or even more.
 After foreclosure it is extremely difficult to avail or get new credit in the future as it may take up to 7 years for the foreclosure mark to clear off from your credit report. In such a scenario you can think of taking the following steps that will help in repairing your credit score after foreclosure. The most important point to consider is that you need to be very diligent and responsible in managing your existing credit. You need to show the lenders that you are financially responsible in handling your credit and other finances.

PLAN YOUR FUTURE HOUSING FINANCE WISELY

Never buy what you cannot afford or that which is beyond your income level. This is one of the main reasons of foreclosure. Whenever you plan for a new house -Look for that you can easily afford in terms of within your budget to pay monthly housing payments. Large amount of monthly housing payments will result in default and eventually lead to foreclosure. Make sure that the amount that you have to pay every month as your housing finance installment is only 25% of your total income. All your debts payments including the housing instalments should not go beyond 36% of your total income every month i.e.

                ALL DEBTS+HOUSING INSTALLMENT DEBT=36% OF MY TOTAL INCOME EVERY MONTH

Your first priority should be to keep aside money for your housing instalment every month before making payment of your other debts.

BE SMART WITH YOUR AVAILABLE CREDIT

You need to be very practical and wise in terms of use of your existing credit. Try to avoid getting any further black spots on your credit report as it can further deteriorate your credit score. Make efforts to remain current and open on all your accounts that are reported to the credit bureaus such as car loans, medical bills, credit cards, housing payments etc...In case you have a revolving credit that is open, use it to only pay off your balances every month.

CONTROL YOUR SPENDINGS

In order to repair your credit score after foreclosure it is very important for you to monitor control over your spendings.Make a list of your total income and total expenditure. In other words, you need to plan and make a budget as it will help you in making wise decisions regarding spending your money.

GET A NEW CREDIT CARD

Once you have total control over your money spending habits, try to get a new credit card. Use the new credit card to make purchases of small amount which does not use more than 20% of your credit card credit limit every month and pay off the total amount due on your credit card regularly every month. Try to make the payment early before your due date. This shows the lenders how well you are managing your credits and will also improve your credit history which in turn will be very helpful towards repairing your credit score.

PAY OFF ALL YOUR DEBTS

Paying off all your debts can in a very positive way impact your credit repair. Take the necessary steps required to bring down all your outstanding balances to zero. For moving up your credit score ,reduce your usage of credit card limit to 25%.Reducing the debts will decrease your debt-income ratio which is very vital for your credit score.

AVOID BUYING A NEW CAR

Avoid buying a new car. Some people suggest  that buying a new car is the best way to repair and build your credit. But due to the foreclosure, your interest rate will be high, which will make your debt-to-income ratio higher than the normal level. Buy a car only if you are in a position financially to easily pay the monthly instalments.