Credit Damage

• After your lender forecloses on your home, a public record exists noting that a foreclosure took place. Once the credit bureaus match your information with that contained in the public record, they insert the foreclosure onto your credit report. A single foreclosure causes your credit rating to drop considerably.
  
  The credit damage you will suffer after the credit bureaus place the foreclosure record on your credit report varies, depending upon the other information your credit files reflect. Typically, the better your credit was before foreclosure, the worse it will be afterward. For example, if you have a 680 credit score, you stand to lose approximately 100 points. If your credit is 780, however, you could lose 150 credit points or more after foreclosure.
  
  

Time Frame

• While a foreclosure notation on your credit report damages your credit score, it does not do so forever. The Fair Credit Reporting Act mandates that foreclosure records can only exist on your credit reports for seven years. After seven years, the notation becomes obsolete and the credit bureaus remove it from your files. The negative impact a foreclosure has on your credit score also diminishes with time, as recent entries have a greater impact on your credit rating than older information.
  
  

Foreclosure Effects

• After suffering credit damage from a foreclosure, you pose a much higher risk for future lenders and creditors. The fact that you defaulted on a major financial obligation can result in businesses turning down new applications you fill out for credit and loans. In the event a lender does approve your application, it will charge you interest rates that reflect your increased risk level. Thus, you will pay higher interest charges on new accounts with a foreclosure on your credit report.
  
  

Additional Credit Concerns

• It is not only the foreclosure itself that has such a negative impact on your credit history. Your missed payments to your mortgage lender also play a significant role in damaging your credit rating. Each mortgage payment you miss can cost you roughly 60 to 110 points, depending on your credit history. Foreclosure does not occur without numerous missed payments.
  
  Like the public record of the foreclosure, your mortgage lender's original trade line remains a part of your credit file for seven years. Thus, the payments you failed to make prior to losing your home also leave you with considerable credit damage after the foreclosure process is complete.