How Long Does Foreclosure Stay on Your Credit?

A foreclosure is among the worst things you can have on your credit history, mostly because of how long it remains. Although there are several credit reporting agencies, a foreclosure shows up on all of them and it's very difficult to remove. Foreclosure can be avoided with with a short sale or deed in lieu of foreclosure. However, these also appear on your credit report.

Types

Equifax, Transunion and Experian are the three major agencies that accumulate your credit information and assign credit scores. They gather data from banks, creditors, insurers and your employers. Your income, amounts you've borrowed and your payment history are all part of the credit reporting agency's records. Your credit score is calculated based on this information as well as any civil judgments or collection actions against you, and bankruptcies and foreclosures you've had.

Effects

A foreclosure will appear in the Public Records section of your credit report. Foreclosures are listed for no less than seven years from the date of the foreclosure sale. There is typically no remedy for this. If you've deeded your house back to the bank in a deed-in-lieu-of-foreclosure or disposed of your home in a short sale, this will often have a similar affect on your credit report, though the lender has some discretion in how they report these transactions.

Significance

A foreclosure on your credit report will make a significant impact on lenders when you apply for a loan in the future. You may be considered a poor credit risk and your application may be denied. However, a lender will sometimes make allowances when mitigating factors like accidents, death of a spouse, natural disaster or civil unrest have contributed to your financial distress.

Prevention/Solution

It's not uncommon for old accounts to show as unpaid when they've actually been settled. By examining your credit reports and correcting inaccuracies, you may be able to improve your credit score to compensate somewhat for the foreclosure. The Fair Credit Reporting Act requires that the credit reporting agencies correct errors on your credit report, but inaccuracies will not be corrected until you dispute them.

Function

To dispute items on your credit report, order reports from each agency and check the details of each item listed. If you find errors, use the contact information provided on the report to speak with the creditor directly. If you are unable to resolve the dispute with creditor, contact the credit reporting agency directly. The credit reporting agencies' websites will tell you what information they require and how you should format your correspondence.