How to Rebuild Your Credit After Repossession & Foreclosure

Having your car repossessed or your home foreclosed on can be extraordinarily stressful, and it will take both time and determination to overcome the effects of either setback. To add to your concerns, your credit score will have dropped considerably as a result of these events, barring you from obtaining new lines of credit. With careful planning and good financial discipline, however, you can rebuild your credit after repossession and foreclosure. By following simple guidelines and having patience, you can restore your good credit in a couple of years.

Instructions

1

Obtain your credit reports from all three credit reporting bureaus: Experian, Equifax and TransUnion. These are available to you free once a year. Apply online to AnnualCreditReport.com (see Resources section). Complete the online application form and you will be able to view all three reports instantly. It will help in assessing how to rebuild your credit after repossession and foreclosure.

2

Check each report carefully. Errors should be reported immediately to the lender and the credit reporting bureau. Correcting errors will start to rebuild your credit after repossession and foreclosure.

3

Check the reports for areas where you could improve your performance (and thus your score). Perhaps you have been late, for example, in making payments to credit cards or to other loans. Every late payment affects your credit history. Ensure that future payments are made on time. If you have credit cards up to their limits, stop using them until you have reduced their outstanding balances. Using less than 50 percent of your available credit will improve your credit rating and assist you in rebuilding your credit after repossession and foreclosure.

4

Get a pre-paid credit card while waiting to reduce the balance on your existing cards. Several pre-paid card issuers give an option, during the application process, to register your card for credit building or repairing. Ensure to accept this option. This means that any transactions you make using your card, are reported to the credit reporting bureaus. Using the card regularly helps you rebuild your credit. Check online for pre-paid cards that offer this reporting service. Compare set-up charges and other fees that may apply. Most pre-paid cards charge a fee for withdrawing cash from an ATM. No charges usually apply for purchases.

5

Don't apply for more credit unless absolutely essential. In any case, until your credit rating has improved, you will likely be declined. Every application for a line of credit is recorded. Declined applications affect your rating. If you need credit, apply to increase a credit card limit for a card that has a good payment record and has outstanding credit of less than 50 percent. Most card companies do not check your credit file for an increase in your credit limit. Provided your history with the card issuer is good, you will be approved. Increasing your credit limit improves your credit rating.

6

Ensure timely payments to utility companies: electricity, telephone, gas and cell phone companies report payment history to credit reporting bureaus. Regular payments, made on time, improve your credit rating.