What Impacts Your Credit Score
As a foreclosure attorney of Sulaiman Law and Associates
, Ahmad Sulaiman has made it his mission to provide legal assistance to homeowners so that they are able to retain their properties as long as legally possible. He also strives to help clients find solutions available under the law that offer minimal damage to their financial future.
According to Sulaiman, your credit score directly affects your prospective finances, including being approved for loans in the future. And the inability to pay your bills on time, or even at all, will negatively impact your credit score. When it comes to home foreclosure, however, the severity of the effect on your credit score may vary. If the score is a major concern, then you may want to keep these variances in mind when deciding your plan of action.
Foreclosure Judgment
The process will be detrimental to your credit score because not only did you miss mortgage payments, but the judgment will show up on credit reports as well. Banks and lenders are usually more hesitant to lend to those who already have a foreclosure judgment on their records.
A Deed in Lieu of Foreclosure
Since it is likely that this route is chosen because you were unable to pay your mortgage, it will be reflected on your credit score. But, since there is no judgment on the case, this is often a better alternative than proceeding with a foreclosure.
Short Sale
Although no judgment is made against you, it is also likely that missed mortgage payments will be reflected on your credit score. And, because a short sale requires the loss of your home, you might be homeless and unable to secure a loan for a new home.
Bankruptcy
Filing for bankruptcy will severely impact your credit score, which is why I always recommend it as a last resort. Instead, try other means of loss mitigation that will be less detrimental to your financial future.
Less Reliable
On the other hand, the credit scoring system has become less reliable. In fact, it was so called good credit scores that enabled many homeowners to receive loans they couldnt afford. Large entities no longer use credit reports the sole measurement of an individuals total creditworthiness.
Here is a New York Times piece that outlined how creditors are taking matters into their own hands. American Express, for example, monitors what customers use their credit cards for to determine the card holders financial future with the company. If you use your card to purchase a round of golf for you and two friends, for example, then you are not penalized because that shows that you have enough money for luxuries. If you use your credit card at a mechanic, however, you may suffer a credit limit loss because it seems to creditors that you dont have the money in your savings to pay for the necessary repair in cash. And, as of February 2009, American Express began offering $300 to cardholders who paid off their existing balances and closed their accounts.
Obviously, there is a shift when it comes to your credit score; but when a report is run on you, you still need to provide the best score you possibly can.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Neither publication of this article nor your receipt of this article create an attorney-client relationship.
by: Ahmad Sulaiman
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