Whether you lose your home to foreclosure, return it to the lender in bankruptcy or unload it in a short sale, your credit score could drop anywhere from 85 to 160 points. The higher your credit score, the harder the hit you will take. But there are some things you can do to position yourself better before or even after a foreclosure or bankruptcy.
- Don’t let credit report errors go unchallenged. Is the balance on one of your accounts incorrect? Challenge it. Are there accounts on your credit report you never had? Challenge it. Credit reporting bureaus are required by law to change incorrect entries. Getting rid of or correcting erroneous entries on your credit report can improve you score.
- If you need to find a new home or apartment because of foreclosure or because you will surrender your home in bankruptcy, take action now. If you can, consider moving out of your home and securing an apartment or rental house before your credit score takes a hit. Because while many apartment managers and landlords will be willing to rent to someone with a low credit score, they may require a larger security deposit. If you apply for an apartment or rental home before your foreclosure or bankruptcy, you may be able to avoid the higher security deposit requirement.
- Begin rebuilding your credit score immediately after bankruptcy by applying for a secured credit card. Don’t delay starting the process of rebuilding your credit score. The sooner you take action, the sooner you will improve your score.