How to Prevent Foreclosure From Affecting Your Credit

Foreclosure can severely affect your credit rating, so you should consider it only as a last resort. Considered the most damaging aspect of a credit rating, it can remain on your credit report for at least seven years. A foreclosure in your credit history lowers your credit score, which impacts interest rates paid in the future, and can brand you as a high credit risk.

Instructions

1

Be mindful of your due dates in the mortgage. You should faithfully track your mortgage due dates, which is the primary step in preventing foreclosure. Contact the bank or lender immediately to try to reach an agreement to stop a potential foreclosure if you think you might miss your deadline.

2

Explain your circumstances to your lender. Inform your lender if you encounter unanticipated crises and want to prevent foreclosure, making it clear you are not ignoring your responsibilities. Share your debt reduction plans with your lender. Banks and mortgage companies generally want to avoid foreclosure because they make more money when you successfully pay a mortgage -- even outside of the established time frame. As such, lenders are more willing to help you save your home when they know your plan regarding mortgage payments.

3

Get responses to any questions in writing. Do not rely on verbal communications alone. Instead, get the person's name and telephone number for future reference.

4

Consider borrowing from your 401k to pay the mortgage. 401k plans allow eligible employees to make salary reductions in order to invest in a chosen area. Because your house is an investment, you may be able to borrow against it through your 401K plan. Ask the human resources department at your company about 401k plan loans.

5

Consider a short sale option. Banks sometimes allow homeowners to sell homes for less than what remains on the mortgage, thereby allowing the owner to avoid the time and expense of foreclosure proceedings. Inquire and carefully read the terms and conditions of the short sale before making such a decision.

6

In case of foreclosure, contact a credit repair company. Credit repair companies can help you remove marks on your credit report by helping you pay for your credit usually with lower interest charges. Search for reputable and trusted companies who are not scammers.