Here’s How a Foreclosure Affects Your Credit Score

If you have recently experienced foreclosure or fear you might in the near future, a major concern is likely how a foreclosure will impact your credit score. Unfortunately, a foreclosure leaves a severe and lasting impact on your credit. The good news is that it doesn’t last for ever, and your credit can recover from foreclosure.



What’s on Your Credit Report?

A credit report serves as the history of your personal finances as they relate to credit, providing lenders and other interested parties an account of how you’ve handled borrowing and repaying money in the past. This allows potential creditors to determine your risk potential as a borrower, and approve or deny your request for credit as they see fit, as well as determine your interest rate if approved.

Just about everything related to your activity surrounding lines of credit is reported to the three credit bureaus — both good and bad — including credit cards cards, loans, judgments against you, IRS liens, bankruptcy filings, information reported by collection agencies (unpaid utilities, phone, and cable bills), company inquiries, and of course, foreclosure proceedings, are all noted on your credit reports.

How Bad Is a Foreclosure for My Credit?

Andrew Housser, co-CEO of, told Mint, “A foreclosure will cause a credit score to drop sharply, typically by 200 to 300 points.” That means a person who had a great credit score of say, 750, could see that number drop to just 450, which is considered very poor. Someone who did not have great credit to begin with can experience even greater devastation to their credit as a result of foreclosure

Even so, a foreclosure usually stays on a credit report for seven years — dropping off as if it never happened after this point. However, keep in mind that additional derogatory marks suffered as a result of foreclosure, such as late payments on credit cards, will still appear. That’s why it’s important to keep your credit obligations in good standing despite a foreclosure and resist the urge to let other payments slip through the cracks. If you keep your credit under control, you can see your credit begin to improve within the next couple of years.

  • Pjhodes

    When I moved, my mail went back by error. The utility company wrote off my bill and sold it to a collection company, and they put it against my credit. Is this legal? I called the utility company and asked for a final bill, and told them I would pay it, they said they only hold it 30 days when mail is returned. They no longer own the paper. Can utility companies report your bills on your credit?