Not everyone is lucky enough to get through the foreclosure crisis unscathed. While some investors are making money off the market through buying, renovating and selling foreclosure homes or bank-owned homes, others are faced with the very real prospect of repairing credit and surviving after a very real foreclosure.
Never put off the task of repairing your credit after a sudden foreclosure or bankruptcy. Foreclosures stay on your credit report for up to seven years and many credit card or loan companies now see as a liability when you invest. Cleaning up your credit will take some dedication.
Here are several steps you can take now to ensure a better financial future:
Check the areas of your life where you can easily cut costs such as when it comes to groceries, getting rid of a second car or other areas where you overspend. Take a realistic look at your income and your debt, as well as your budget every month.
For example, do you really need DirecTV Pay-Per-View? Can you live without cable until you get back on your feet?
Pay your bills! Having your home foreclosed does not signal the end of the world. Perhaps your mortgage was just too much, but all your other bills should be paid on time if you have the means to do so. Most companies not only look at outstanding debt, but how much you have paid in full. This is especially true for student loans and credit card bills. Living frugally at this time can affect your future in positive ways.
Keep track of your credit through free services like TransUnion or Experian. Many provide free, accurate credit reports you can use to help repair yours. Get reports from multiple bureaus to see where there are erroneous items and get them off through disputes as soon as you can. Many consumers are not aware that certain items -- like liens or bankruptcies -- should fall off the credit report after a certain number of years. Do this as soon as you can.
Increase your minimum payments if you can, so that more of each payment goes to satisfying the principal balance of your loan or credit card so end up with a smaller amount as time goes by. Learn about capitalization amounts and times.
Most student loans, for example, capitalize quarterly, after deferments or forbearances and add this amount to your principal. You cannot prevent capitalization, but you can prevent the amounts that are added to your principal balance.
Find money managers such as credit counselors who can help you balance your credit and checkbook. Beware of companies that ask you to pay ludicrous amounts to magically fix your credit because they are often scammers who are taking advantage of your misfortune. Many non-profit and government organizations can help you fix your credit if times have been hard.
If you can, avoid foreclosures before they happen. Talk to your bank about short sale possibilities that can help you salvage your credit and never avoid their calls. Banks are often more interested in helping you keep the home — foreclosures mean significant financial loss for them as well.
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