Lauren Smith, WalletHub Staff Writer
A foreclosure affects your credit by lowering your credit score significantly and limiting your ability to borrow in the future. Foreclosures can cause your score to drop by 100+ points and will remain on your credit report for 7 years.
You can use WalletHub’s free credit score simulator to find out how a foreclosure will impact your score. You can also check out your latest credit report and credit score to see exactly what happens.
Other Key Things to Know About Foreclosure & Your Credit
Foreclosure occurs when a lender takes back ownership of a borrower’s home, following a prolonged period of nonpayment. Once the lender has possession of the property, the entity may attempt to recoup their losses by selling it.
If there is a deficiency balance (a difference between the sale price and the outstanding mortgage), the lender may also attempt to collect that debt. The account can go into collections if a deficiency balance is not paid, which is its own negative entry on your credit report, further lowering your score.
You can learn how to rebuild your credit and access personalized tips for free here at WalletHub.
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