How To Remove A Foreclosure From Your Credit Report

Your credit score and credit history have a huge impact on your financial life. Your credit score will dictate whether you are qualified for a loan, the loan amount, and the interest you’re meant to pay. It also helps lenders decide whether you’re worth the financial risk.

When you apply for a loan to buy a house, the property serves as collateral on the loan. Collateral ensures that you as the loanee will repay the loan amount as agreed. If you fail to make your monthly mortgage payments, the lender may take your house to recoup their money through a process called foreclosure.

Mortgage lenders usually report foreclosures to credit bureaus who then proceed to add that information to your credit report. As per the Federal Deposit Insurance Corporation (FDIC), nearly 250,000 families face foreclosure every 3 months.

Having a foreclosure reflect on your credit report can be very problematic to your creditworthiness. However, removing a foreclosure from your credit report is possible. It’s not as simple as you would remove late payments but it can be done. Below are tips to guide you on how to go about it.

1. Check for Errors

You need to check whether there are any inaccuracies or miscalculations related to the foreclosure listed on your credit report. To do this, you will have to order for credit reports from Equifax, TransUnion, and Experian. Keep in mind that you’re only allowed a free credit report only once a year.

Once you receive your report, scrutinize every detail involving your account. Look at the foreclosure balance amount, the listed dates associated with the foreclosure, the name of the lender, and their account. Any slight mishap in the listed details can help you file a dispute with the aforementioned credit bureaus.

Many inaccuracies have appeared in foreclosure cases with the most prominent being lack of proper procedure. Check the rubber stamps on foreclosure documents and the records cited in the report.

If some records are unavailable, it could mean that the bank that provided the mortgage is probably not in business anymore. In many instances, mortgages are bought by another bank. This leaves a messy trail of paperwork that makes it hard for people to pay their mortgages on time.

Write to the bureaus requesting for information verification. The bureaus are obligated to verify, make the necessary corrections, or remove it altogether within 30 days, failure which means the foreclosure must be removed from your credit report.

However, don’t make the mistake of thinking that Equifax, TransUnion, and Experian all operate in similar ways. They are three different credit reporting agencies with different approaches to how they compile their data.

2. Get in Touch With Your Lender

If the dispute with the credit bureau does not result in removal of the foreclosure from your credit report, the next step should be writing to the lender who foreclosed on your home. Make sure you cite the errors listed on your credit report just as you did with the credit bureaus.

Make sure the tone of language in your letter is demanding and forceful to compel them to remove the foreclosure from your credit report within 30 days.

Lenders usually are not able to verify the data because of poor record-keeping, especially if they have passed the data to various debt collectors. Lenders are also usually too occupied to make investigating every information verification request mandatory.

3. Remove Old Notations

A foreclosure should reflect on your credit record for 7 years and an additional 180 days from the last time the last mortgage payment was paid as agreed between you and the lender.

If your foreclosure listed on your record has been there for more than 7 years, you can have it deducted by writing to the bureaus that have reported the foreclosure. The Federal Trade Commission (FTC) has a sample letter for disputing credit report errors that you can download from its website.

In your letter, make sure you cite section 605 of the Fair Credit Reporting Act (FCRA) which states that all data involving foreclosures cannot appear on consumer credit reports for a period lasting longer than 7 years. Credit bureaus are legally mandated to look into your dispute and make amends within 30 days.

4. Consult a Professional Credit Repair for Assistance

Removing a foreclosure from your credit report involves filing disputes with all three credit bureaus. Because of how they operate, you have to exercise care when writing up your disputes. It’s important that you don’t sound ‘frivolous’ or else the bureau will dismiss your request.

While the Fair Credit Reporting Act protects consumers, it gives credit bureaus the grounds to ignore people who they feel are abusing the law. The bureaus decide if a dispute is frivolous based on the communication and evidence provided.

Because of the sensitive nature of this matter, people usually hire professional help to assist them in removing foreclosures from their credit reports. If all this information and work feels overwhelming and you feel that you need foreclosure help, York, PA, it has several firms that can help you with that.

It Takes Work to Build Credit

Regardless of the circumstances that got you in a financial rut, dealing with a foreclosure is a highly stressful situation, especially if you have a family to take care of. During the economic collapse of 2008, many Americans had their homes foreclosed.

A foreclosure will do significant damage to your credit report especially if you had a high score. A poor credit score means you might not be considered for certain employment opportunities, you might not receive approval for utilities, and you might qualify for services such as insurance.

However, your credit will not be ruined forever. Foreclosures may stay on your credit report for 7 years, which is a long time, but making constant payments on any other credit accounts you have over those 7 years will help balance out the derogatory entry.

Paying bills and personal loans on time will reduce the credit score impact of foreclosure and eventually, you will be able to get a house.