Rebuilding Your Credit After Foreclosure

Reader Question: I have heard a lot of conflicting information about rebuilding a credit score after the foreclosure process. Why is there so much dispute over this topic, and how can I rebuild my credit after being foreclosed on?

There are two reasons you encounter so much conflicting information on the subject. The first has to do with the abundance of misinformation online today. There is no "intelligence barrier" to publishing things online. Anyone with a blog or a website can put up an article about rebuilding credit after foreclosure, regardless of their knowledge or expertise.

In other words, a lot of folks just don't know what they're talking about -- but that doesn't prevent them from sounding off! :-)

The second reason for mixed messages has to do with variables. There are dozens of variables when it comes to credit scores, the foreclosure process, and rebuilding your score after you've been foreclosed upon. For example, let's say that two neighbors in California both go through foreclosure (not too far-fetched, in this economy):

• John has always had good credit, and being foreclosed on is an isolated incident. He is also determined to improve his score after the fact, and he knows exactly how to do it.
• Fred, on the other hand, has had a lot of financial problems -- the home foreclosure is just the latest in a long series of missteps. He is not inclined to work as hard as John to rebuild his score after the fact.

In this scenario, John will have an easier time rebuilding his credit after the foreclosure process. He will also see results more quickly. For one thing, his score probably did not drop as low as Fred's did, because the foreclosure was the only financial problem he has had. He will also be more proactive than Fred in taking the steps needed to improve his credit after that incident.

Now you can see why there's so much confusion about this subject, and so much information that doesn't seem to "jive" with other sources. When you combine the misinformation with the many variables involved in the process, it gets even more confusing.

Here's the good news. Restoring your credit score after foreclosure is not that complicated. Sure, it takes discipline on your part. And it's a slow-but-steady process that could take months. But it's possible. Here a couple of articles I recommend reading, for starters:

• How Long Does a Foreclosure Stay on Your Credit Report?
• How to Repair Credit After Bankruptcy?

By the way, I'm aware of the differences between filing bankruptcy and getting foreclosed on. But both of these things will do serious damage to your score, so it's a relevant article worth reading.

At this point, you're probably wondering how long it will take to rebuild your credit after going through a foreclosure process. Unfortunately, this is not something I can answer (for the reasons outlined above). This kind of negative entry can stay on your credit report for up to seven years. During that time, you may be limited as to how high you can raise your score again. But you can certainly improve it during that seven-year period -- you just might hit a "ceiling" at some point, at least until the item expires from your credit report.

I hope you have found this response helpful, and I encourage you to dig deeper into this website. There are nearly 200 articles, tutorials and Q&A sessions on this blog. Use the search tool at the top of the site to get started. Good luck rebuilding your credit score!