Effect of Foreclosure on Credit Scores of Atlanta Homeowners
The first thing consumers want to know when considering bankruptcy is, "How will filing affect my credit score?" Yet maybe what we should be asking is, "How will not filing affect my credit score?" Especially when we're at risk for foreclosure.
It's no news that bankruptcy ends up on your credit report, but so does foreclosure. And while bankruptcy can pave the way for you to begin repairing your credit (in fact, Atlanta bankruptcy attorneys report that many clients receive offers for credit cards or loans soon after filing) turning your home over to the bank doesn't quite have the same effect.
To compare, filing for bankruptcy can automatically cause your score to drop between 130 and 150 points, according to CNNMoney.com. Being 30 days late on a payment can drop your score around 100 points, 90 days late up to 135 points and by the time you're dealing with a foreclosure, short sale or deed-in-lieu, you're looking at up to 160 points - in the same range as bankruptcy.
So what's the difference? Bankruptcy is a step forward, while losing your home is a step back.
When you fall victim to foreclosure, you forfeit your home but you're still stuck with the debts that made paying the mortgage impossible in the first place. In other words, the root of the problem continues unaddressed.
Chapter 13 bankruptcy, on the other hand, can deal with debt and stop foreclosure. Yes, your score will drop momentarily, but it's canceled out by the fact that you are being protected against the damaging effects of losing your home - and are gaining the opportunity to move forward.
If you're considering defaulting on your mortgage payments - or if you've already missed a few - don't let your house get away because you fear the effects of bankruptcy. In reality, bankruptcy may be the best thing you can do for your credit. Have questions about bankruptcy, foreclosure or credit? Check out the Video Learning Center at DebtStoppersUSA.com - and consider signing up for a free one-on-one debt analysis. Our Atlanta bankruptcy attorneys can help you determine your best path to better credit - and financial freedom.