When it comes to people who have gone through a foreclosure, a recent study has found that for many it wasn’t because those homeowners were irresponsible with their budgeting, but rather that they defaulted due to the recession and should more be viewed as those who just had a one-time crisis similar to a divorce or medical crisis.
According to the TransUnion study, many of those who had gone into foreclosure during the economic downturn should otherwise be considered good credit risks as they are current on their other lines of credit, like those from credit cards or student loans. Instead, their default was more just a reflection of the recession and high unemployment rates, and should rather be looked at as a one-time crisis, and not a reflection of their credit management.
However, part of the problem is that even though some consumers went into default due to the recession and not necessarily bad money management, credit scores can still be negatively impacted by a foreclosure, which means that consumers need to take some simple extra steps to ensure their credit is restored.
For one thing it’s important to pay all debts on time every single month. Even if the payments are just the minimum, this will still improve a person’s credit score.
Aside from making payments on time, consumers should also keep their card balances below 30 percent of the maximum allowed, and to be proactive by talking with lenders if it seems that there will be a problem with payments in the future. By talking with a lender there is always the possibility of being granted some delay in payments or even having the payments temporarily reduced.
In general it’s important to remember that this most recent recession hit many homeowners, and whether a home was lost due to the rate increasing on a subprime loan or the loss of a job, it is still more than possible for a person to rebuild their credit.
Source: San Francisco Chronicle, “Foreclosure victims not all deadbeat, report says,” Carolyn Said, 31 May 2011