It’s not easy to walk away from your home, admitting that you need to accept a foreclosure in order to move on and start over. Many Americans have moral hangups about allowing a foreclosure on their homes, but at the same time, it’s unavoidable, due to a financial catastrophe outside your control.

On top of that, a foreclosure on your home isn’t a “free pass” to start over again. The entire foreclosure process can result in a big hit on your credit score. It can be difficult to borrow again after a foreclosure, and finding good rental housing can be a challenge in some markets if your credit score has been significantly damaged by a foreclosure.

The good news is that your poor credit due to a foreclosure isn’t the end of the world. It requires a lot of work, but it is possible to recover your credit after a foreclosure.

Tackle Your Credit Card Debt

Tackle Credit Card DebtBecause, in most credit scoring models, your credit utilization (or how much of your available credit you are using) makes up as much as 30 percent of your score, it can help to tackle your debt. Hopefully, you have been able to re-do your budget now that you now longer have a mortgage payment to make. Do what you can to tackle your credit card debt, reducing what you owe so that your score sees some improvement.

Be wary of closing open credit cards. It might be tempting to take this step, but the reality is that it could damage your score still further. Closing credit card accounts removes some of your credit availability, and that means the utilization part of your score can be brought down. As you tackle your credit card debt, make it a point to employ strategies to avoid using the cards. Cut them up, or freeze them in a bowl of ice so you can’t use them, but try to keep from closing the accounts.

Make Your Payments On Time

The next step is to make your payments on time. From bills to credit cards to other items, pay your bills on time. When you make your other loan payments on time, it is recorded as a positive event on your credit report, and that can help you recover your score to some degree. Non-credit bills should also be paid on time. Even though your on-time payments won’t be recorded as positive events on your credit report, missing payments can prompt negative reports. Keep those off as much as possible, while adding to the good history.

Be Realistic About Time Frame

Realistic Time FrameWe like things to happen instantly, but the truth is that fixing your credit — especially after a foreclosure — takes time. You need to pay down your other debt and make on-time payments for a period of months before you start seeing solid improvement. Even though a foreclosure can remain on your credit report for up to seven years, the good news is that your credit score can make a recovery in that time. At least, it can recover to the point that you might be able to buy a house two to three years after your foreclosure. You should also start seeing the ability to rent at a reasonable rate, or get a decent deal on a car loan within a year or two. You won’t get the best deals for some time, but at least you’ll likely qualify.

Work hard to get your finances back in order so that you don’t wind up in worse debt, and make it a point to stay on top of your situation going forward. Develop those good habits, and build an emergency fund so you aren’t stuck using credit later, and you’ll lay a foundation for a better future — and overcome the credit problems associated with a foreclosure.

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