Credit Scores and Foreclosure: What's the Point?

By George Stargell, Senior Editor   

If you're headed for foreclosure, your credit score probably isn't your biggest concern. You already know (or should know) that your score's going to take a big hit, and some people might even prefer not knowing for a while how big a hit that is.

Unfortunately, your credit score doesn't simply freeze in place when you go into foreclosure. Your credit history continues to grow according to the types and amount of revolving debt (credit cards and utility bills) and installment accounts (mortgages, car loans, etc.) you have.

As a result, with every new payment you make or fail to make on these lines of credit, your credit score also continues to change.

Why should my credit score matter when I'm in foreclosure?

Well, you're likely to live a long time after the foreclosure date, and your credit score is going to continue to play a huge role in your future — and present — finances:

  • It'll determine the interest rate on your credit card, not to mention how much you can charge on it.
  • It'll determine how much you pay in interest charges for your next auto loan.
  • It'll play a part in determining insurance premiums, cellphone service charges, and other "necessities."
  • Perhaps most importantly, it can be used by a landlord to determine whether or not to rent you a house or apartment.

As fickle and arbitrary as you may think credit scores are, the fact remains that they have a huge influence in your life, before, during, and after foreclosure. You therefore have two choices:

  • You can bury your head in the sand, pretend that it just doesn't matter, and let the invisible hand of the market write you off as a long-term credit risk.

Or:

  • You can accept the fact that, to have any chance of success in today's economy, you need to take responsibility for your credit history and credit score — immediately and for the rest of your life.

If you decide to take responsibility for your financial future, the first step is to find out where you stand right now. A credit score can do that for you.

The choice is yours.