How does an NJ home foreclosure/ NJ Bankruptcy impact your credit score?

Sep 10, 2019 | Bankruptcy, New Jersey Foreclosure Defense

New Jersey Foreclosure Impacts Your Credit Score

Many people ask how foreclosure affects his or her credit score.  They also ask how bankruptcy affects there credit score.  Both situations have different impacts on more than your Credit Score. Going over your options and affects may help you decide what kind of plan you want to make.

Foreclosure Impacts on Your Future

LendingTree compiled data on many people that were in foreclosure and the affects that they saw.  Lending Tree reported, “In 2018, there were more than 600,000 homes in foreclosure in the U.S. This is the lowest since the financial crisis when foreclosures peaked at about 2.9 million in 2010. Which paints a rosier picture than many people in New Jersey were faced with roughly 1% of all NJ homes in some point of foreclosure and still in the top 10 states for the number of foreclosures.

LendingTree’s “Key findings” are not that surprising.  Credit scores on average took a big dip in many cases (150+ points), and then began to improve over time. From a personal view my firm have had clients in foreclosure that because they were not on the mortgage were not impacted by the actual foreclosure filings,  while at other times different clients were falling behind in paying other bills that then impacted their credit scores.  So, the expectations is that if you miss your payments whether a mortgage payment or a credit card payment your credit score will drop, and then recover if you use your credit wisely.

Basically foreclosure will not destroy your credit forever and will eventually drop off your credit report after 7 years. We offer a program called 7 steps a 720 credit score that helps people rebuild their credit faster by explaining how many credit reporting systems work.

Bankruptcy Impacts on Your Future

Bankruptcy tends to act the same way as a foreclosure on someone’s record, but in the case of chapter 7 in will be on a credit report for 10 years. And, once again, it is possible to rebuild someone’s credit after bankruptcy within 2 years from the time of bankruptcy discharge.

Bankruptcy works in the favor of a filer whereas foreclosure is generally only negative. Bankruptcy wipes out debts and makes it easier for someone to pay future bills.  It basically is a financial reset that allows a person to reset their finances to make going forward easier.

We offer examples of client’s actual predicted credit scores (All personal identifying information has been removed for privacy sake.) on our 7 steps a 720 credit score program of clients we have had and what their scores will predict to be one year after bankruptcy.

Impact of a Low Credit Score = Higher Interest Rates

The previous referenced LendingTree report showed that borrowers with a credit score above 740 and foreclosure in the past two years paid a higher average rate of roughly 5.02% compared with those who either never had a foreclosure or the foreclosure was not in the past seven years of 4.7 percent.

So even people with a great credit score still get dinged for having a foreclosure on their record.  A $500,000 mortgage has roughly $1600 in extra interest in its first year for people with a 740+ credit score compared to those without a foreclosure.

However, even never having a foreclosure is not a magic bullet for a lower loan interest rate.  Someone with a 640-670 credit score who never had a foreclosure or the foreclosure was not in the past seven years of was getting an average rate of 5.3%. This a $1400 difference in the interest more for a person with only good credit compare to someone with great credit and a foreclosure.

If you want to go over all of your options you should talk with a New Jersey Foreclosure Attorney to go over all of your options. An attorney will respect your privacy, answer all of your questions, review all of your options related to your mortgage, discuss options related to any hardship you face without being judgmental. Contact us today to go over your options related to your loans for real help. This costs you no money. Come to one of our New Jersey Offices, or call us at (973) 200-1111.

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