A foreclosure can have a ripple effect throughout the rest of your life, even on your employment. At the very least, a foreclosure likely means you cannot obtain credit on reasonable terms for several months. However, you probably can avoid a foreclosure affecting your chances at employment as long as you offer a good explanation for your financial situation.
Impact on Credit Score
Foreclosure is the second-worst item you can have in your credit history, next to bankruptcy. As with any negative item, the effect of foreclosure on your credit rating depends on the rest of the information in your credit history. Most credit ratings drop no more than 160 points, but it is possible your score could drop by 200 or 300 points, according to Nina Silberstein in Mint.com. Missed payments and the foreclosure itself stay on your report for seven years.
Employment
Almost half of all employers perform credit checks on some positions, and 13 percent of employers run checks on all applicants, according to the Society for Human Resource Management. A foreclosure is a hugely negative account, so an employer may question your character and finances with this on your record. People in dire straits sometimes steal from their employer, especially if the position requires handling cash like a bank teller. Thus, you may not qualify for certain positions based on your foreclosure, even if you meet all the other requirements. Some states, such as Illinois, ban certain credit checks.
Avoiding Foreclosure
If you are considering foreclosure, you probably have missed payments on your credit record, which look bad, but not as terrible as a foreclosure. Foreclosure is a last resort, so you may have options available to you to save your home. For example, you can sell your home for whatever you can get and negotiate with your lender to pay off any deficiency under an installment plan. You may even get a forbearance, where the lender delays payments for a few months, or a modification on the terms of your loan from your lender.
Tip
The credit reporting bureaus allow you to leave comments on anything in your credit history. You can also write a letter to a hiring manager about your credit history. For example, you might say that unexpected medical bills caused you to miss payments on your mortgage, but you received help and mortgage problems are no longer an issue.
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