Post BK foreclosure and credit scores...

[johnnycakes]

We're 5 months post the close of our Ch 7.

In the petition we surrendered our house (way underwater), and the mortgage was discharged.

We've been doing a pay through without any issues. The original mortgage was a 30 year with the first 5 being I/O. At the time of the mortgage (re-fi) we had a theoretical $100,000 + in equity, and were planning to sell within a year, so the I/O made sense. Of course you know the story - market crashed, house value now 35% of what it was...

Anyway, the mortgage will become P/I in November. The payment won't go up much, but really we want out of the neighborhood - and have outgrown the house to boot.

All that to get to the question...

Since our mortgage can no longer be reported on our credit report - what would happen in the case of a foreclosure? I assume the lender couldn't report - but what about the "public records" section of the report. If a suit is filed, it should show up there.

Anyone have to deal with this issue before? The wife and I have cleaned up our reports quite a bit. I don't want to step backwards on that path - but I also don't want to pay any more than necessary for a house we don't have any intention of staying in for much longer.

[IBroke]

Unfortunately, the foreclosure COULD show up as Public Record. However, that doesn't mean it has to. Not every foreclosure is reported - mine wasn't.

I wouldn't be too concerned about it and certainly wouldn't base any financial decisions on that.

[johnnycakes]

We're not too concerned with it really. Whatever is best for us is what we will end up doing regardless.

I'm curious though about the "public records" section of the credit report. Do items in that section impact the score - or are they just informational?

For example... Is it the filing of Bk that tanks the score, or is it when the creditors report the accounts as being in IIB status? Is it the foreclosure filing that impacts the score - or is it when the lender reports the account as in foreclosure?

The only difference it makes to us is how we will deal with our lender. If a foreclosure filing would harm our scores, we would be more likely to try to work out a Deed in Lieu with them. If a foreclosure will not impact our scores, we are more likely to just walk away when it best suits us - or even stay there rent free while the case winds its way through the courts.

[IBroke]

We're not too concerned with it really. Whatever is best for us is what we will end up doing regardless.

I'm curious though about the "public records" section of the credit report. Do items in that section impact the score - or are they just informational?

For example... Is it the filing of Bk that tanks the score, or is it when the creditors report the accounts as being in IIB status? Is it the foreclosure filing that impacts the score - or is it when the lender reports the account as in foreclosure?

The only difference it makes to us is how we will deal with our lender. If a foreclosure filing would harm our scores, we would be more likely to try to work out a Deed in Lieu with them. If a foreclosure will not impact our scores, we are more likely to just walk away when it best suits us - or even stay there rent free while the case winds its way through the courts.

The impact of any personal record on your credit-score drastically gets smaller after the entry becomes 2 years old. From a score-perspective, a foreclosure wouldn't do much additional damage because there already is the BK public record. Score-wise, the biggest difference is between having no public record at all and having one. The difference between having 1 or 2 is not that significant. When it comes to the filing of a BK, it is the public record that puts you in a different "bucket" - or consider a different "league". You are now compared to others who filed for BK as well. That's why your score itself can even go UP after filing - as you can see, mine did.

It's always better to avoid a foreclosure - especially if you want to become a homeowner in the future again. That's when a previous foreclosure might come back to haunt you.

[frogger]

It's always better to avoid a foreclosure - especially if you want to become a homeowner in the future again. That's when a previous foreclosure might come back to haunt you.

It's hard to avoid a foreclosure, even if you file bk.

Many times, the lenders do a foreclosure in order to guarantee a clear/clean title. A DIL does not guarantee that same clear/clean title.....

[IBroke]

It's hard to avoid a foreclosure, even if you file bk.

Many times, the lenders do a foreclosure in order to guarantee a clear/clean title. A DIL does not guarantee that same clear/clean title.....

That's true.

It might also be possible that in the future, many lenders will look at a foreclosure in a different way than they did before this mortgage meltdown occured. After all, a foreclosure is not just the "very unusual" any more.