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WALKING AWAY WITH POOR CREDIT
Walking away takes a toll on a foreclosed homeowner's credit. But so do late payments -- in particular, those that are more than 90 days overdue.
According to Fair Isaac, whose FICO credit score is used by most lending institutions, bankruptcy, credit card defaults and foreclosures stay on a person's credit report for seven years. That said, a single bad account such as a foreclosure would be better than a bankruptcy, which usually involves many defaulted accounts. But if all other bills remain current, Fair Isaac says a foreclosed homeowner's score could begin to rebound in as little as two years, reopening the doors to homeownership.
Still, a foreclosure could cause creditors to worry that their card is next, raising interest rates, lowering credit limits and closing accounts entirely to protect themselves -- even if the consumer keeps that particular account in good standing.
Additionally, some landlords check credit reports before renting properties and may require a larger security deposit from someone in a recent foreclosure.
Sources: Fair Isaac, John Ulzheimer of Credit.comRecent Business stories
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