Foreclosure and your Credit

In today's economy, foreclosure does not discriminate. Seemingly they are happening on every block and in any neighborhood. By definition, a home foreclosure "is a legal proceeding in which a mortgagee, or other lien holder, usually a lender, obtains a court ordered termination of a mortgagor's equitable right of redemption." (Source: www.FICO.com) In other words, a foreclosure happens when a mortgaged property is sold to pay off the loan of a defaulting borrower. A foreclosure will be detrimental to your credit and will ultimately require patience to improve your credit score as a foreclosure will affect your credit standing for seven years after the date it is entered in to public record. This may be shocking especially to those of you who previously had a clean credit history.

There are two types of foreclosures that are commonly used: Judicial Sale and Power of Sale.

Judicial Sale, also known as Judicial Foreclosure, is available in all fifty states and required in many. It is the sale of the mortgaged property supervised by the court. The proceeds of the sale go first towards paying off the lender or satisfying the mortgage. Any other lien holders get their piece of the pie next and finally the borrower receives any proceeds, if any, that remain.

A Power of Sale foreclosure, which is also available in many states, is one in which the mortgage holder manages and the court is not involved. Often this option is included as a clause in the initial mortgage agreement. The benefit here is that it can be more expedient than a Judicial Foreclosure. In terms of the proceeds, Power of Sale is exactly the same as a Judicial Foreclosure.

While fixing your credit may initially seem daunting, you can absolutely bounce back. Don't be discouraged; don't give up because credit repair is essential for your financial security in the future. While the foreclosure will remain on your credit report for seven years, its impact will lessen over time and there are other measures you can utilize to manage your credit standing in the interim. Consider contacting a reputable credit repair company. Visit www.vitessefinancial.com for more information on credit repair.