Credit Consequences of Foreclosure and How to Recover

When it comes to maintaining a good credit score, this can be a difficult endeavor, especially if you are strapped for cash. Building a good credit score requires persistence and discipline, and it this is often a several years’ process. One event that may have significant and long-lasting consequences on your credit score is foreclosure. Continue reading to learn about the credit consequences of foreclosure and what you can do to try to recover after experiencing foreclosure.


Before anything else, we need to define foreclosure. This is an event that occurs when you as the borrower fail to make mortgage payments on time. With a mortgage, your property acts as collateral, so foreclosure occurs when the lender claims your property since you have failed to hold up your end of the repayment agreement. Foreclosure has significant negative consequences, as will be discussed in the next section.


The biggest consequence of foreclosure is that it will lead to a significant drop in your credit score, typically of 100 points or more. This is very meaningful considering that 850 reflects a perfect credit score. The magnitude of the drop will likely depend on where your credit score was prior to the foreclosure. If you began with a very high credit score, the drop will be comparatively more than if you began with a lower credit score.

In addition to the immediate hit to your credit score, foreclosure will have a lasting impact since it remains on your credit score for seven years. This is the same case with other events like bankruptcies and medical debts, which also remain on your credit score for a similar timeframe. Ultimately, if you experience foreclosure, you should pursue strategies to try to partially offset the impact and improve your credit score.


While it may not be possible to fully rebound from the impact of foreclosure, there are some key strategies that will allow you to begin to build back toward a better credit score. These include:

  • Making payments on time – pay off outstanding credit card balances in full if possible or be sure to at least make the minimum payments; on-time payment history makes up 35% of your credit score
  • Minimizing credit utilization – stay far under your credit limit whenever possible, ideally at 30% or less; credit utilization makes up 30% of your credit score
  • Using a secured credit card – applying for a new secured credit card can help you build a stronger credit history; be sure to follow the two guidelines listed above

If you can do all three of the strategies listed above, this is the most ideal. However, even just doing one or two of these can help to move you in the right direction.


In an ideal world, you would never have to deal with foreclosure since this would mean you were able to make all of your mortgage payments consistently on time. However, at the end of the day, this may not be possible, and you may indeed face foreclosure. Just know that when it comes to your credit score, while it will take a significant hit at first, there are ways to bounce back!