Going through the pains of foreclosure does not only have blatant impacts on one’s credit standing; it can also severely affect one’s psychological and emotional state. There is something utterly painful about losing one’s home, that abode where the family has shared memories in, that one place where they all feel safe.
When the home is taken away, it becomes a strong symbolism for how the family life has fallen. Although the unit may be strong, it does rattle the foundations. For many consumers foreclosure in recent times is something that has befallen not only sub-prime borrowers but also has resulted because of other economic problems facing the country. In the past few years, many of the individuals whose homes have fallen into foreclosure, were closely tied to the rapid increase of unemployment.
What is foreclosure?
Foreclosure is the process by which a mortgaged property is repossessed by the applicable authorities, such as banks or lenders, due to non-payment of borrowers to satisfy mortgage payment requirements.
Most people have latched on to the promise of getting out of the sticky situation easily by refinancing their homes, but many have only ended up getting themselves in a deeper problem. It becomes a vicious cycle of borrowing and paying debts, that they no longer see an end to this scenario. In the meantime, their homes are still foreclosed upon, and they are nowhere near to rehabilitating their credit.
Let the rebuilding begin
Despite the many obstacles seemingly impossible to overcome, there are certain simple steps you can take which can show you how to rebuild credit after a foreclosure. It may take some time, and a whole lot of effort, but the important thing is that it is possible.
Aside from endeavoring to reclaim home ownership, rebuilding your credit is also that one other thing that is going to be most important to you. As you may very well know, your credit score or rating is essentially that one number that reflects your credit-worthiness. Have a negative mark, and you might as well say goodbye to the prospects of getting any supplementary financial help from banks and lenders.
Things to do
Here are the things you should do upon facing foreclosure so that you can get right to rebuilding your credit.
1. Deal with your debts
Yes, this may seem like such a roundabout solution to your problem considering that this is where it all started. However, there is no better solution than facing the main issues head on. In this context, your home was foreclosed and your credit rating went south because you weren’t able to make timely payments. Depending on the state in which you reside you may have been able to discharge your debt via bankruptcy. This option however will result in a longer period of time of negative credit information being shown on your records.
Whether you did or did not file for bankruptcy for all your remaining outstanding debts what you should do is begin paying off the existing loans so it will be easier for you to start anew. Usually, banks or financial lenders are amenable to agreements for a flexible payment scheme given your condition. Start by contacting them to work something out so your debt isn’t turned over to a collection agency. There’s going to be a lot of trust required here, however, that is why it is imperative that you show them they can trust you with this second chance.
2. Know your obligations
The other thing you can do is to finally get down and really dig deep into your credit standing. Check your credit score once and for all. The problem is that most people hardly give any mind to what is reflected on their credit reports, and that is why they do not know what their financial standing is.
Suddenly, they find themselves surprised to find out just how bad of a financial ruin they are already in. If you were in that position once, you should have a good mind not to let yourself get sucked into that same situation again. The lesson of the story is for you to always be on top of your credit reports. After all, this is about the most credible source of information when it comes to your financial history.
The credit report reflects the loans and obligations you currently have, as well as how credit-worthy the data makes you. If you were to have a starting point for rebuilding your credit, checking your credit score rating would be it.
3. Open up a new credit card
If you are unable to obtain a regular credit card this is something you may wish to consider. This one, you should approach with much caution, though.. Being unable to handle the demands of using a credit card may only get you back to where you started from. The point of opening up a new credit line is not so that you can go back to spending money you don’t really have.
The point is rather that you can have a brand new slate in terms of financial credibility. Of course, the condition here is that you are going to be able to make your credit card payments correctly this time around.
It may be wise for you to get a secured credit card. This one should help you manage your credit card finances better. It requires a deposit so that you can use the card. Use this to charge small amounts – don’t overdo it. You just need to show some credit trail and that you are able to pay the balance in full every month.
It may take some time to fully redeem your credit score rating; then again you already know that it’s not going to be easy. This is the difficult path that you will have to go through, but at least you can rest assured that soon, you’ll be able to see that light at the end of the tunnel. Though negative information can remain on a credit report for years, most creditors become more forgiving following a couple of years of proving you are back on the right track.
Remember, there are steps you can take to get you out of this financial mess you are in. Foreclosure does not have to be the end of the line for you. Instead, use it as an opportunity for you to start over again. This time, you get the chance to do it right.
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