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How Does Foreclosure Impact Your Credit Score?

CNNMoney is reporting that Fair Isaac, the company that created the FICO credit-scoring system, has finally released some numbers to indicate how mortgage defaults and foreclosures may impact your credit score. The numbers are based on two hypothetical borrowers, so they may vary from person-to-person. 

According to the article, consumers with shorter credit histories and fewer open credit accounts tend to be hit harder by negative marks on their credit reports. This is because there is less good credit to pad a negative report. 

The amount of damage that a delinquent mortgage or a foreclosure does to a consumer's credit is also related to time. A prolonged period of non-payment will have a greater impact on a credit score than a single missed mortgage payment. Based on the Fair Isaac numbers, doing absolutely nothing may be the worst possible decision a person could make. 

A mortgage that is 30 days past due will generally cause a credit score to drop by 40 to 110 points. 

A mortgage that reaches 90 days past due will cause another dip of 70 to 135 points. 

A delinquent mortgage that resolves in a short sale, deed in lieu or a foreclosure will shave off another 85 to 160 points.

A bankruptcy will cause a credit score to drop by 130 to 240 points. 

Interestingly enough, filing a bankruptcy before things get bad may represent a larger one-time reduction in credit score, but also represents a lower overall reduction. Totalling up the high end of the other three categories results in a 405 point drop in an individual's credit score, 165 points more than the "worst case" scenario for an individual filing for bankruptcy. 

What the CNN article fails to note is that there are ways to rehabilitate a damaged credit score. We have provided a handy guide that can be found here. By far the best point that the article makes is one that cannot be repeated enough: do not wait until things get bad. The longer you wait, the worse it gets.

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Ahmad Sulaiman, Mohammed Badwan and their staff did an exceptional job and handled our case like true professionals. They made us feel comfortable throughout the entire process and were made available at any point should we have any question about our case.

When first facing foreclosure my family and I were in serious need of legal advice. I came across the Sulaiman Law Group on the internet and the outstanding reviews are what led us to finally make the call. Always having our best interest at heart, Mr. Sulaiman and his firm are very reliable, kind, and well educated.

My experience with this law firm is beyond amazing! When facing foreclosure my wife and I were very stressed and embarrassed and Sulaiman’s Law Group relieved us of all of our worries.

Atty. Sulaiman & his staff are very professional in all aspects & knowledgeable. My bankruptcy went smoothly. I intended to foreclose but one of the lawyers, Atty. Volheim, gave me advice that helped me save my house from foreclosure. These are very good people, I cannot say it enough.

Foreclosure defense might be very challenging and unpredictable, but one thing is for sure - Ahmad and his colleagues have the integrity and the knowledge to get the best results for you.

I found Mr. Sulaiman’s law firm on the internet while searching for a law firm to handle my bankruptcy case.

Finally, an attorney that truly understands the law. Everything from speaking to Omar to schedule the initial appointment through my meeting with Ahmad was an amazing experience.

Just wanted to let you know that I am very satisfied with the results achieved from Sulaiman Law Group in reference to Mortgage Modification and Attorney Fees re-imbursement.

My visit to the Sulaiman Law Office was so healthfully wholesome and literally therapeutic. I felt as if I had been to the top of Mount Everest, where I breathed fresh and pure air like a cool refreshing breeze at high noon in a long hot summer in Chicago.

After listening to my answers to his questions, without reluctance and hesitation, without a second thought, in a friendly, confident tone, he assured me that I am qualified for a Chapter 7!

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