Credit After Foreclosure Bankruptcy

Foreclosure or repossession often has a greater impact on your credit score than bankruptcy. Although bankruptcy may decrease a good score by 100—150 points, bankruptcy will often allow a poor credit score to improve over time after discharge.

A foreclosure will prevent you from financing a home for three years, but bankruptcy will only prevent you from financing a home for two years.

Long after a repossession, you may only get auto loans if you have a large down payment or at high rates. However, most people will be able to finance an auto within a year after they obtain a discharge if they retain a car and home and make those payments on time. Our page on how to get a 725 credit score explains the steps to get credit after foreclosure or bankruptcy.

Credit After Foreclosure Bankruptcy

The basis for granting credit tends to remain to be able to show that you have at least a short-term history of making payments on time. After filing for bankruptcy, you have to show the ability to repay. In the case of larger purchases such as a home or car, the security you offer to guarantee repayment is important. Most people who file for bankruptcy can buy a car within a year and home within two years after discharge. If you are required to furnish a cosigner, it means the loan company has no confidence that you will repay. By paying on items like a car or home after the bankruptcy was filed you can quickly regain credit. Applying for a lot of credit or not paying on time after the bankruptcy will continue to harm your credit.

⎆ Paying a debt collector does not help.

Often you are better off filing bankruptcy than paying a debt collector. It is rarely good advice to mortgage a home or cash in your retirement to pay a debt. This is just stealing from your children and retirement. I have never advised someone to pay a collection account. An increase or decrease in balance for a collection item normally won’t cause your credit score to decrease further. Disappointingly, paying down or paying off a collection has little or no scoring impact. Neither does paying off an installment loan like a car loan. On the other hand, paying down revolving credit or department store cards almost always helps your score. Similarly, paying off a debt that was previously listed as severely negative, even if charged off by the original creditor, will also likely have no positive impact.

⎆ Debt collectors rarely sue – they report.

If you are considering paying off a collection account think again. It is rare for a bill collector to sue to collect. After they have reported a collection item, they have done all of the damage they can. Only the person who owns the debt can sue you. The debt collection agency or servicer never owns the debt. Often debt collectors will intentionally lie to collect. If they do and you can prove it you have a fair debt collection practice case.

Where to Report Foreclosure Scams

Federal Trade Commission (FTC) for foreclosure scams.

Trustee Regions and Offices for foreclosure scams that involve bankruptcy

Resources for Foreclosures

Foreclosure Forms Links

Other Related Information

Louisville Kentucky Foreclosure Defense

How to Avoid Louisville Foreclosure Scams

How to Get a 725 FICO Score After Bankruptcy

If you’re facing foreclosure and want to save your home then, seek an attorney immediately and avoid the scams. Contact my office right away to start the conversation. Nick C. Thompson, Attorney: 502-625-0905