The thing about which I’ve been thinking a lot is the effect of a foreclosure on a person’s credit score, due to its impact the whole housing crisis is taking place.
Frankly speaking it is one of the worst black marks you could ever get on your credit report other than bankruptcy, but the impact may not harm you going forward as much as it once was harmful in the past.
You should now think about it; over the past years foreclosures have raised extremely quickly to new higher records, so the impact must surely fall having a larger percentage of borrowers who are facing this problem.
Role of FICO
And it is strongly believed by me that if Fico has planned to stay connected with what is happening then they will surely need to take into account as they continue to fine tune their credit scoring formula.
They should not use the old metrics, which were used when there where only a small group of the population experiencing foreclosure, as it is simply not suitable anymore, and it might be improperly shutting out deserving borrowers.
That does not mean that foreclosure is a permissible crime, but it is now become more forgivable than it has been in the past.
Presence of Foreclosure on your Credit Report
It is very unfortunate that even if Fico does weigh a foreclosure filing less severely, it will probably remain on your credit report for seven years despite of any scoring changes.
By this it means that, although your credit score might not be as negatively influenced numerically speaking, but if it is only present on your credit report than that could be enough for you to face a denial for credit or new mortgage in up coming years.
Of course, there are certain rules regarding previous foreclosure that individual banks and lenders have, so in order to accommodate prospective borrowers they may adjust their underwriting guidelines as well.
One thing that you should keep in mind is that there is no specific numerical amount that a foreclosure will lower your credit score, this is because each credit profile is highly unique and all of your other history and activity is taken into account by it.
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{ 2 comments… read them below or add one }
Well for me even i give great importance to the Fico … A person should always be careful when it comes to Fico. This is the way we can stay far from foreclosures and other hazards….
Sally Crofts last blog post..Summer Jobs for International Students
Fico for sure has it’s importance… And foreclosures aren’t good in any circumstance… specially in credit score