If you are unhappy with your credit score? You’ve come to the right place. I will show you how to increase your credit score after a foreclosure.
I definitely can relate… once upon a time, my husband and I both had perfect credit scores.
Then in 2006 we purchased our first house at an outrageous price with two loans: one was a 30 year fix loan and the other a balloon loan. Crazy right?
Around 2009 the company I worked for went out of business and I lost my job. We could not keep up with the payments and it eventually led to us losing our house.
When we foreclosed our house, it affected our credit scores and in turn hurt us in many ways.
If you have been there, you know how hard it is to do anything beneficial without good credit scores.
One problem we remember at the time was that it was really hard to find a rental that did not require credit scores. Fortunately, we were lucky enough to find one that did not required it.
It took a few years to get back on our feet. During this time, we were determined to increase our credit scores to be prepared in buying our next house.
However, we were told we could not purchase another house for a period of 7 years.
After talking to many people, due to our personal circumstance, we were able to clear up the reason for our foreclosure.
Instead of getting a conventional loan which we would have had to wait 7 years we went through FHA and only had to wait a period of 3 years before we purchased our 2nd home.
Important Steps to Increase your Credit Score
Below is how to increase your credit score after a foreclosure:
1) Know Your Current Credit Score
In order to increase your credit score after a foreclosure, you need to know what your current credit score is. Run a credit check and find out what is causing your score to decrease.
Take care of them one at a time.
For us, that was how we found out about our foreclosure. With a letter of explanation due to our special circumstances at the time, we were able to waive it.
In addition, we found out that I had a billing dispute which was reported without my knowledge.
I was advised to simply pay it off. However, I refused to pay for it and wrote letters to the credit bureau disputing it.
Within a short-time, it came off our credit report.
2) Open Credit Cards
One important thing to do is to open credit cards with high limits.
This means they are willing to give you high credits. This DOES NOT mean you are going to use all the credit they give you.
We recommend that you only use up to 10% of the amount of credit you get on a card.
You must pay it off at the end of each statement cycle. This will increase your credit score overtime.
We were trying to avoid debt and were used to just paying for our things right away. However that was not helping our scores.
The method that does help a whole lot is the method we just explained.
What if you can’t get a high limit? Just work with what they give you. It works the same way.
Only spend up to 10% of the credit they give you and pay it off each cycle. Once they know you are responsible they will increase your limit.
So, go on and try it and see for yourself!
3) Track your Credit
Sign up with Citi Bank credit card. There is no annual fee. See our review on Additional Stream of Income: Citi Bank Credit Card Perks for more information. They offer free credit check for all their members.
You can log on and check your credit scores. The second option is to sign up with Credit Karma. It is also free! We like this one and personally use it often to check our scores as a bench mark.
FYI, we are not sure how they pull their information for their scores because it may be slightly different when comparing to the reports from the Credit Bureau.
We only use it to know whether our number is going up or down during the process so we have an idea.
The good thing abut it is that it does not hurt your score when you look at it daily. However, when wanting to know your true score we recommend you go through Equifax, Transunion or Experian.
Our Credit Score two years later
Following the three important steps above, we were able to increase our credit scores after a foreclosure from 500 points to 750 points. We were able to do it, so can you!
Start by opening a credit card. See related post: Citi Double Cash Perk to find out the benefits of this card.
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