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How to Build Your Credit Score Back Up After Foreclosure or Short Sale?

How to Build Your Credit Score Back Up After Foreclosure or Short Sale?

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Credit Score, Foreclosure, Short Sale. Credit Score after Foreclosure or Short Sale. So you’ve foreclosed on a home or had to sell for less than what you owed on the home? You probably think you’re doomed as a consumer moving forward. And while a short sale or foreclosure is never something that you want to have on your credit report, neither is a be-all, end-all when it comes to purchasing power. However, it should go without saying that either a foreclosure or short sale will require consumers to enact some credit repair.

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How to Build Your Credit Score After Foreclosure or Short Sale

Credit Score after foreclosure. Just how to you go about rebuilding credit after a short sale or foreclosure? Here’s a closer look:

Rebuilding Credit After Foreclosure/Short Sale

The first thing that you should do after a foreclosure or short sale is put it in the past. Yes, it happened. Yes, it’s unfortunate. Yes, it’s not going to look great on your credit report and it’s going to hurt your credit score. But like we said in the opening, it’s not a be-all, end-all. So put it in the past. It’s over with. While the short sale or foreclosure will stay on your credit report as a negative part of your history, that doesn’t mean that you can’t build positive activity beyond that. The goal for a consumer following a short sale or foreclosure is to build positive activity to make the negative on the credit report look like nothing more than a blip on the radar. Here’s how to do it:

  • Immediately work to start (or continue) at least three positive lines of credit: Whether it’s a secure credit card, personal loan or some other type of account, these lines of credit are all ideal opportunities to build positive activity. Since the FICO score weighs consumer behavior on making on time payments, credit history and credit utilization, you can put the negative of a foreclosure or short sale in the past by building positive activity with at least three accounts. Perhaps you have a healthy account or two opened? Great! Keep up the good work with it.
  • How to build positive credit: Like we hinted at in the last bullet point, the best way to build positive credit is to make on-time payments and keep balances low.

If you follow the two steps above following a foreclosure or short sale, it’s not uncommon to see a significant improvement in your credit score within as little as six months. In fact, it’s not out of the realm of possibility for those with credit scores in the low 500s to see their scores increase into the high 600s or even the 700s after a foreclosure or short sale by building positive activity. Just remember, it’s not a quick fix – it take a little bit of time.

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Credit Repair – What Exactly Is It?


Your credit score is the lifeblood to a lot of financial opportunities, like buying a car, financing a home or taking out some other sort of loan. But when you’re credit isn’t exactly up to snuff, taking the proper steps to improve it in order to make yourself a more attractive customer and allow you to qualify for low interest rates, is essential.

And that’s exactly what credit repair is – anything that will either improve or increase your credit score to make you a more attractive customer. This post will take a look at some of the common things you can do to repair poor credit.

“The Three Ups”

So now that we’ve identified the process as anything you can do to either improve or increase your credit score, it’s time to take a look at some of those practices that you can put in to action today. These strategies are often referred to as “the three ups”:

  • Clean Up: This involves working to remove any – or as many as possible – of the negative items that are on your credit report. Some of these items may be there by error (after all, it is estimated that as many as 42 million Americans have some sort of error on their credit report), others may be past blunders. While you may not be able to clean up every negative mark, it is likely that you can get some removed.
  • Build Up: This “up” involves having good, healthy accounts that you pay on time. These accounts are reported to the credit agencies each month and can help bring up the credit score. After all, paying bills on time is one of the biggest factors in determining a credit score.
  • Pay Up: Finally, there’s the aspect of paying up. This involves not running away from debts and collections, but meeting them head on and coming up with a way to settle them. Think about it. If you never pay up and settle your debts, they’re going to be hurting your credit score – and prolonging any credit repair efforts – for a long while.

In a nutshell, credit repair is exactly what it sounds – it’s the act of fixing your credit and thereby improving your financial buying power. But it is not something that can be completed overnight, in most cases it can take months, perhaps even several years to see a noticeable difference. That’s why it’s important to commit to repairing your credit and coming up with a plan to do so. Fulfilling it can take your credit score from poor to good, or from good to excellent, and the real winner will be you.

how to rebuild your reputation

Establishing Credit – When Should You Start ?

When Should You Start Establishing Credit?Length of credit history accounts for 15 percent of the overall credit score. It’s certainly not the single most important category when it comes to calculating your FICO score, but generally speaking, the longer your credit history, the better reflection it will have on your score.

Length of Credit History Basics

So just what does the credit score take into account when it comes to credit history? Here’s a look:

  • Age of the oldest account established, as well as the age of your newest established account. An average age of all accounts is also calculated.
  • The amount of time that specific credit cards have been established.
  • Amount of time since certain accounts were used.

When to Start Building Credit?

Most credit repair experts agree that people should begin to establish credit as soon as they’re able to handle the financial responsibility and the consequences that they may be subject to. This generally falls into the late high school and early college years.

So how can someone begin to build credit during these late teenage years, especially when they might not have a large income to rely on? Here’s a look at some credit tips for establishing a history:

  • Credit card: Parents will need to co-sign on any credit card opened for their child if they’re under 21 years of age and don’t have a consistent, reliable source of income. Many credit card companies offer student credit cards, with low credit ceilings to help teens start establishing credit.
  • Authorized user: An alternative to co-signing on a credit card is adding a teen as an authorized credit user on an existing account. This is a preferred route by many experts, as the child can simply be dropped as an authorized user if things go awry – something that’s much easier to do than get out of co-signing.
  • Secured credit card: A “secured” credit card is similar to a regular card, except that users are required to put down a deposit as assurance to the creditor that payment can be met. Usually, the amount you’re able to charge with a secured card is limited to the deposit you put down.

Responsibly managing that first credit card that is opened (or amended) with your name on it is the key to building a positive credit history and credit score, which will open more doors down the road in terms of home loans, auto loans and more. However, failing to enact proper debt management during these crucial early years while you’re establishing credit history may not just force you into a lengthy repair credit program, but it can also impact the credit score if you have a co-signer on your account.

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Secured Credit Card – Credit Cards for Bad Credit

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If you have bad credit, one of the best things you can do to start fixing that situation is get a credit card. Sound backwards? A new line of credit that you manage well can do a lot to increase your credit rating. And, in situations involving travel and rental cars, having a credit card makes like that much easier. So, how do you go about getting one when the numbers say no?

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Start with Your Bank

If you have a good relationship with a bank, there is a chance that they might approve you for a Secured Credit Card when others won’t. Most banks have credit card offers for current account holders right on their websites. Often, when you apply online for a regular unsecured card from your bank, you can receive an answer right away. Many, if you are not granted a regular card, will automatically offer a secured card instead.

Consider a Credit Union

Credit unions are also more likely than other sources to give those with blemished records a break. One other advantage is that, because they are member organizations, you may be able to get a card with a lower rate, as well.

Read the Fine Print

If you are unable to get a regular card, a secured card may be your only option. The amount that you deposit into the account will equal your credit limit. These cards will almost always have annual fees and higher interest rates than cards available to those with better credit.

Make sure you are aware of all of the fees and rules before applying for the card. Some unscrupulous companies that target those with bad credit have monthly fees that, over the course of a year, add up to two to three times the annual fee for other cards.

Pay On-Time Always and Other Rules

Once you have a card, treat your agreement with the card company with the utmost respect. Do not charge over the limit. Make your payment on time every single month. It is best to pay off in full each month and not overuse the card. The percentage of your available credit that you are using affects your credit score, so, low utilization can raise it.

Next Steps

Whether it is secured or unsecured, the credit card you get with bad credit is not going to be the best deal. Spend six months to one year using the card a bit each month and paying it off in full. Then, call and ask for a better offer. If you have a secured card, ask to be approved for one that is not secured. If you were able to get one without a security deposit, ask for a higher limit and a lower interest rate. Over time, you will get access to better and better deals and expand your financial opportunities.

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Rebuilding Credit – Secured Credit Cards Are A Great Tool

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At some point in the credit repair process, you are going to want to start building new credit. Providing a record of being able to be responsible with a revolving loan will improve your credit rate and open new opportunities to you.

Rebuilding Credit – How a secured card can help.

A secured credit card is a card that is backed up — secured — by a deposit. Many start with deposits of around $200 to $300. Your line of credit is equal to the amount of money that you have deposited.

These cards do not extend your spending capabilities, since you are basically borrowing money from yourself. But, they show lenders that you can be responsible with a line of credit.

Save Up Some Cash

Before you start actively looking for a secured credit card, make sure that you have a little cash in the bank. You will need this for your security deposit and also to pay any annual fee associated with the card.

Find a Card

Start by enquiring whether your bank or credit union offers a secured credit card. If they do not, or if you do not qualify for their card, begin researching online to find the best deal. Sites like BankRate keep track of offers from a number of lenders.

Consider factors like the annual fee, how the money is stored and what interest rates are offered. The annual fee is the most important factor, since some cards have extremely high rates. The interest rate is of less importance since your goal will be to pay of the card each month and never owe any interest.

Do not apply for a bunch of cards. Apply for one with a high acceptance rate and wait to hear back before you put in an application somewhere else. Too many applications at once can temporarily lower your credit score and cause your application to be declined.

Pay It Off Religiously

One you have the card, use it for one or two small items a month. For building credit, a good rule of thumb is to avoid a balance that is higher than 10% of your limit. So, on a $500 secured credit card, keep that expenditure under $50.

The best bet is to use it for a regular expense like gas or groceries. If you have trouble managing money, adding meals out or new clothes to your monthly expenses is counterproductive. By transferring an expense you will have anyway, you avoid increasing your costs.

Then, pay off what you charge in full every month. If you pay off the card within the grace period, you will not owe any interest. Many card issuers will allow you to set up automatic payments. If you have a regular and predictable source of income, automatic payments can assure that you never forget your bill.

After several months of on-time payment, you can move up to an unsecured card. From there, the benefits of good credit, from better job opportunities to a home purchase, are in your grasp.

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