Research shows that a foreclosure is the single most damaging event to your credit and that it takes an average of seven years for a borrower’s score to recover from a foreclosure. The impact depends on how much money you still owe on your mortgage at the time of foreclosure. However, some of the impact can be recovered if you:
- Take care of your late payments during the pre-foreclosure stage
- Get on a deferred payment plan or forbearance plan during the pre-foreclosure stage
- Get certain negative events removed after successfully completing the foreclosure process
Foreclosure is a multi-step process that usually takes six months or more to complete. Because foreclosure is not a single event but rather an ongoing process, the effect on your credit rating is far-reaching. Make sure you take action at the start of the process so the effect on your credit is minimized.