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Rebuilding Credit


What You'll Learn

  • A foreclosure has a very serious negative impact on your credit score, however you can rebuild your credit
  • You can rebuild your credit by paying your bills on time, keeping credit card balances low, and paying off debt
  • Building a spending and savings plan can help you understand how you’re spending your money and ways you can start saving

Work to Improve Your Credit

Probably the most important work you will face post-foreclosure is rebuilding your credit.   It will take focus and effort, but your hard work will pay off with time.



While foreclosure has a very serious negative impact on your credit score, you can regain control of your finances with time and diligence.

Following are several important tips that will help improve your credit:

  • Always pay your bills on time and with at least the agreed upon amount
  • Keep balances low on credit cards and other revolving accounts
  • Pay off debt instead of moving it around
  • Don't apply for credit you don't need
  • Do your rate shopping for a given loan within a short period of time
  • Request a free copy of your credit report annually. By knowing what’s on your credit report, you’ll be able to find areas that need improvement.
  • Check for errors on your credit report, and work with the credit-reporting agency to fix them
  • Beware of fraudulent "credit repair" companies and report any suspicious activity immediately! There is no magic way to improve your credit, so be suspicious of any person or agency that says they can "fix" your credit – especially for a fee.

3 Ways Housing Counselors Can Help


Build a Spending and Savings Plan

As you're working to rebuild your credit, you'll want to take a close look at your financial situation and assess how much money you need to live and how much debt you need to repay.

Following are some helpful tips from Freddie Mac's CreditSmart® Curriculum on creating a spending and savings plan:

  • Determine your monthly net income, which is the income remaining after taxes and payroll deductions
  • List the fixed expenses you pay each month, including rent, utilities, and car payment
  • List the variable expenses that could fluctuate a bit each month (e.g. groceries, gas, etc.)
  • Set aside money each month for purchases you know you will need to make in the future, like haircuts, school supplies or clothing
  • Compare your income with your expenses. Look for ways to increase your income and decrease your spending.
  • Establish short- and long-term goals for yourself. For example, in six months you may want to eliminate $100 in monthly expenses so you can put it into savings.
  • Set a savings plan and stick to it. Work toward saving at least three months of expenses as your safety net.
  • Always keep an emergency fund. Just like savings, you want to ensure you have the ability to pull from an emergency account without jeopardizing your monthly expenses.
  • Plan ahead for major expenses, and avoid impulse buying.

Key Takeaways

  1. With focus and hard work, you can rebuild your credit after a foreclosure

  2. Be sure to pay your bills on time and don't apply for credit you don't need

  3. Assembling a monthly budget can help you figure out how you're spending your money and ways to save

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