Rebuilding After Foreclosure

If you're in foreclosure, facing foreclosure, or have recently lost your home in a foreclosure, here are some survival tactics you can use to keep moving forward.

The key is not to look back! Move forward. As hard as that might be, this is not the time to start asking yourself what you could have done to prevent this. It's done …let's move forward and get back on track. Thousands of people are in your same situation these days, you need to keep your head up, and stay focused.

You need a new place to live.

If you're still in the home but in foreclosure, this is going to be your best chance to save some money for a home to rent. If you are in the home during the foreclosure process you will need to put aside the monthly amounts you would have paid the mortgage company or bank. You must save at least two months mortgage payments plus an amount needed for a rental deposit. Unfortunately your credit score will be affected and landlords and rental agencies will be looking closely at that. You will likely have to pay a larger deposit to secure a rental residence.  Keep this in mind as you prepare to leave the home. When choosing a place to rent, you want to make sure it fits your budget. A good rule of thumb is that housing expenses should not exceed 1/3 of your gross monthly income, before taxes. If you can do it, try to rent a home where you can start saving money. Keep what you save in a wealth account. You will want to start rebuilding as soon as possible.

When you do find the right place to rent, your best bet is to have a cashier's check in hand along with proof of income. Overcome any objections from the landlord, and don't be shy about sharing your plans to get back on track with your finances. There are understanding people out there. Something will come along you just have to keep looking.

Relocating from a home to a less costly, sometimes smaller rental home can have some implications you will need to face.  Leaving your home may stir up negative emotions as you embark on a major change in your life. Again, try your best to remain focused on the present and all you have to look forward to as you begin to take steps toward financial freedom.

Once you have settled into your new rental home, it is time to start taking a look at how you spend your money.

Rebuilding Your Credit      

Learning how to rebuild credit is one of the most important things to learn after a foreclosure.  Rebuilding your credit is all about being patient and doing the right things every day over a certain period of time. If you can learn to do things right consistently, your credit score can be boosted back up again. Here are a few steps to successfully rebuilding your credit after a foreclosure.

Get Affairs In Order

The first thing you have to do is get your financial affairs back in order. Typically, the reason behind a foreclosure in the first place is that your financial affairs were not in very good shape. You took on too much debt or your payments were too high for you to afford your mortgage. Over a long period of time, it became too much to handle and you gave in to foreclosure. If you want to make sure that you do not have similar problems in the future, you need to get everything in line. 

If that means getitng rid of a car payment, you need to do it. If you need to eliminate cable television and similar unnecessary expenses, then you need to do that as well. Even if it hurts a little bit, you need to do your best to make it possible to pay your monthly bills again. If you do not take these necessary steps, you may end up in the same situation again.

Make Payments on Time

Once you have your financial affairs in order, you need to get on a schedule and make your payments on time every month. This one step is going to make the biggest difference in improving your credit score. When credit bureaus calculate your credit score, on-time payments make up 35% of the calculation. Therefore, you want to do everything you can to make your payments on time every single month for a long period of time. 

Eliminate Debt

Another step that you need to work on is eliminating your debt. While it may not be easy to do, you need to take the necessary steps to do so. If you have several credit cards or accounts with balances, it reflects negatively on your credit file. Credit bureaus like to see that you have less than 30% of your maximum limit used up at any given time. Therefore, you should not max out your cards and carry balances on them. Pay down the balances a little at a time, and it will make a big difference. 

Use Your Credit

While you should not rack up balances and just leave them, you still need to use your credit when you can. If you have a credit card, make small purchases and pay them off on time. If you do not use your credit, it will dry up.