Five Strategies to Rebuild Credit after Foreclosure

The sting of a foreclosure has more than emotional consequences. Financial consequences can be overwhelming. Even the start of a foreclosure can lower your credit score up to 200 points. A foreclosure will stay on your credit report for seven years.

There is hope for rebuilding your credit score, but it will take time. You can be a homeowner after the waiting time imposed by regulators is over. Fannie Mae requires a three year waiting period before reapplying for a Fannie Mae backed loan with extenuating circumstances such as divorce, job loss or medical problems. For all other borrowers, the waiting period is seven years.

It is difficult to get new credit lines with a low credit score. Even if you are approved, the lender will charge a higher rate. It's important to persevere and stay the course towards the rebuilding process. The effects of a foreclosure don't last forever. Although there are no quick fixes, you can be on your way to rebuilding by following these tips.

Request your free credit score to find the foreclosure damage to your credit. You can check your scores at many sites such as www.annualcreditreport.com. Check your balance on your old mortgage to be sure you don't still owe anything. Proceeds from the sale of your home may not cover all costs and you may owe the difference. If you are responsible for the difference make arrangements immediately. There are lenders who settle for less than what is owed. It is called a deficiency judgment and it's better than not getting anything.

Look at secured credit cards that require a security deposit. They are designed to help people with no credit or bad credit develops good credit. Then apply for a variety of credit, including revolving accounts and some installment fixed loans. Be careful not to do this all at one time. It can give the appearance that you are desperate for credit. Also too many inquires about your credit at one time can also lower your score.

Pay your bills on time every time. If possible, set up an automatic payment system to make certain you're not ever late.

Keep your credit balances low. Credit cards that are maxed out or carry high balances, will negatively affect your credit score.

Watch out for credit repair scams and companies that promise to clean your credit for a fee. The federal trade commission warns, "The truth is that no one can remove accurate negative information from your credit report. It's illegal. Only time and responsibly handling your new credit will rebuild your score.

Remember there is no magic that will instantly fix your credit score. However, with proper research, planning and following these tips, you will be on your way to a better score.