 TITLE: Understanding Foreclosure CONTENT: How Does a Foreclosure Impact Your Credit?\n------------------------------------------\nA month or two after a foreclosure order is issued, a foreclosure entry will typically appear on your credit report, and will remain there for seven years from the date of the first missed payment that culminated in foreclosure.\nA foreclosure is considered a serious derogatory event in your credit history, second only to bankruptcy in terms of severity. Many creditors won't even consider applicants who have foreclosures on their credit reports, while some will disregard foreclosures that are several years old, if the applicant meets the rest of their lending criteria.\nForeclosures have a negative impact on credit scores as well, but as with other negative credit report entries, the number of points by which they'll lower your score depends in large part on how high your score was before the foreclosure and how many other negative entries you have on your credit report.\nMissed payments hurt credit scores more than any other single factor, and foreclosures typically occur only after at least four successive missed payments, which means your credit scores likely will have fallen significantly before the foreclosure appears on your credit report. (If you are missing payments on other debts as well, this of course has a compound effect.) All that said, it would not be unusual for a foreclosure to cause a FICO® Score☉ drop of 100 points if your FICO® Score is in the mid-to-high 600s, and a drop of 150 points or more if your score is 750 or higher.  \nAlternatives to Foreclosure\n---------------------------\nGenerally speaking, lenders prefer to avoid foreclosure whenever possible. Removing occupants and reselling a property is expensive and time-consuming, and it is not the business home lenders want to be in. Every communication the lender issues following the first missed payment will have a contact name you can use to discuss your situation with a lender representative. Taking advantage of that option is almost always in your best interest. You may be able to negotiate a new payment plan with the lender (for which you should expect to pay higher interest and fees in exchange for a more manageable monthly payment). If that doesn't allow you to stay in the house long term, it could at least give you time to sell it before foreclosure occurs.\nIf your local housing market has slowed, or property values have fallen and you're \"upside-down\" on the loan—that is, you owe more on your mortgage than the market value of the house—you may also be able to get the lender to agree to a short sale. In a short sale, you sell the house for as much as you can get and the lender accepts that sale amount as settlement of your loan. A short sale is far from ideal. It leaves you with no net proceeds from the sale of the home and, because you didn't settle your mortgage under its original payment terms, you'll get a negative entry on your credit report, but one that's less severe than a foreclosure. END