Credit repair companies often prey on customers by making outlandish promises the consumers wants to believe, such as eliminating the record of a foreclosure. The credit repair company might be able to get rid of a foreclosure, but not because of any special knowledge or tactics. A better resolution is to build your credit history back up yourself.
Identification
Nobody can get rid of a foreclosure if it actually happened to you. Any company that guarantees the removal of a foreclosure is a fraud. The tactic it probably suggests is an illegal one known as "file segregation" -- using a fake Social Security number or a Social Security number from a deceased person with good credit. Moreover, the illegal tactics suggested by credit repair companies rarely work. Credit bureaus and banks track customers by address in addition to a Social Security number.
Considerations
The only legitimate way a credit repair clinic can remove a foreclosure occurs when the credit bureaus falsely report one on your record. However, the Fair Credit Reporting Act gives you the right to remove mistakes on your record for free. The credit repair clinic likely charges hundreds of dollars just to send a dispute letter. Unless you do not feel you can handle the dispute on your own, you save money doing it yourself.
Time Frame
A foreclosure sticks to your credit report for seven years. It will negatively affect your credit scores until the seven years are up, but you have plenty of time to rebuild your credit history before that happens. You might still have "OK" credit as long as foreclosure is your only negative, which puts you in an excellent position to rebuild your score in a year or two.
Warning
In the event that you choose a credit repair company to help remove an erroneous foreclosure, review the Better Business Bureau for complaints about the company. Also, do not go with any company that charges up-front fees, which are illegal and the sign of a credit repair scam.
Rebuilding Credit After Foreclosure
Rebuilding credit after a foreclosure works much the same way as with any major financial incident. Do everything possible to save money to pay outstanding debts and at least make minimum payments on time. You will probably not qualify for another mortgage immediately, so learn to live in a more humble dwelling. Also, continue to use credit. You can start with a secured credit card -- a revolving account backed by a savings account deposit -- and apply for an unsecured card after you pay on time for several months.
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