Many people, many more than usual and many more than in past years, have recently experienced the trauma of not being able to make the house payment, not being able to catch up after delinquencies and the horror of foreclosure, not to mention the people who never really missed a payment but were completely unable to sell the home for as much as they owed when they needed to move, thereby resulting in a ?short sale? on their credit report.
And all of these problems affect your credit scores and your credit reports. The question is how much? And how long? And what can I do to improve now that the crisis has past?
Well the people at FICO, the credit score people, have long been tight-lipped about how much these types and even other types of problems can affect you. You can check out this article on Mintlife, ?How Mortgage Delinquencies Affect Your Credit Scores? to see some of the worst details.
Apparently, it has much to do with how high your credit score was in the first place. If you had a score of 680 there is no difference between a 30 day late and a 90 day late (except of course, it is much easier to pull out of a 30 day late and if you haven’t been able to make payments for as long as 90 days, you may find that nasty foreclosure to be inevitable).
But if you had a 780 score to start there is a difference between the 30 and 90 day delinquency.
An interesting note is that if you had a 680 score, a short sale would negatively affect your score as much as a foreclosure. Rather seems extremely unfair for those millions of folks who just got unlucky in the market and couldn’t sell their home. You know, if you haven’t missed a payment that ought to count for something, don’t you think? Is the typical homeowner in the typical town in the USA actually responsible for the fact that real estate prices have plummeted since they purchase their home? See, these credit scores are not always reasonable and very often not really fair.
And no matter what your score was to start with, any one of these problems can make it much, much worse. It will take time to recover.
Approximately, 3 years for a short sale or a foreclosure, 5 years for a bankruptcy.
But one consideration is the fact that until mortgages are more readily available, even to the people who have struggled in the past recession the housing crisis will not really end.
And that is a boon for you if you had these types of problems in the past because the price of housing in coming down. By the time your credit has recovered the prices will probably be even lower.
Image via Flickr by wwworks