How to Remove Foreclosures From a Credit Report

Being foreclosed on is one of the most terrible things that can happen to a person–losing one's home is a devastating loss.

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Furthermore, it can damage your credit report and score for several years, making it more difficult to obtain loans and credit cards that may be needed for large purchases. 

In this article, we’re going to explain what happens during a foreclosure and how it can affect your credit report. We’ll also explore ways to potentially have a foreclosure removed from a credit report if it is erroneous or the loan was obtained through false pretenses–this can be done by utilizing the help of credit repair companies in Austin, Texas, like The Phenix Group.

What Is a Foreclosure?

Before we fully explain a foreclosure, it's important to understand why a bank would simply give you $200,000 to buy a house when there's a chance you might not pay it back.

When a bank grants someone a mortgage, this is not just an agreement to repay the amount borrowed–the mortgage also acts as what is known as a lien on the property. A lien attached to a property means that if the property is sold, the lien holder (in this case the bank) will be paid the amount of the lien before any remaining money is given to the person who sold the property. 

Borrowers who fall behind on their mortgage payments may attempt to sell the property before the bank forecloses, and because of the lien, the bank will be paid its money before the seller receives any proceeds. If the home cannot be sold before foreclosure or the owner neglects to pay their mortgage, the bank will likely foreclose on the property. This means having the home seized and given to the bank so that it can sell it in an attempt to get its money back. 

How Does a Foreclosure Affect My Credit Score?

The short answer is it will affect your credit score quite negatively. However, because there was likely a series of missed payments before foreclosure, each of those missed payments were already lowering your score significantly. By the time the foreclosure happens, gets reported to the credit reporting agencies, and is listed on your credit report, your credit score was probably already low enough that most lenders would not agree to loan you money. 

A foreclosure will remain on your credit report for a period of seven years, but it's important to note that this does not mean that your credit is completely destroyed for seven years. It is possible to begin repairing your credit score immediately by continuing to make your scheduled payments on any other outstanding loans or credit cards you may have. So long as you make your payments on time each month and you aren’t maxing out your credit cards, your credit score will slowly recover. 

How Can a Foreclosure Be Removed From My Credit Report?

If a foreclosure is legitimate, only the seven-year time limit will remove it from your credit report. However, if you never had a mortgage and the foreclosure listed on your report is an error, there are ways of disputing and correcting this. Furthermore, if the foreclosure is a result of identity fraud or someone falsely using your name and credit profile, you may also be able to have the foreclosure removed. 

The process of disputing fraudulent and erroneous items on a credit report is a daunting one. Typically, it involves many hours waiting on hold to speak with representatives at banks, credit agencies, and even the police in the case of identity theft. Furthermore, there is a large volume of paperwork that must be sent between you and the aforementioned parties. 

This daunting task can be made infinitely easier by hiring a qualified credit repair company like The Phenix to work on your behalf in disputing erroneous items—not only foreclosures, but errors such as incorrect amounts, accounts, or missed payments. Credit repair companies can file the necessary paperwork and work with creditors to correct mistakes and help you get your credit profile back on track. They can also provide financial information, such as how credit card cash advances work, and even if you have legitimately bad credit, they can offer valuable advice on how to raise your credit score over time through a combination of refinancing and on-time payments.

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