Illinois Foreclosures and Your Credit Score
First the statistics about foreclosure; for May 2009 - there were 321,480 properties that turned up in foreclosure filings in the country. The total number of properties affected by foreclosures and listed for distress sale in the entire United States is 1,979,063. In the State of Illinois, which is the 7th ranked in the top 10 States of worst foreclosure activity; the total foreclosure filings in May was 10,942. To put these numbers in perspective, 1 in 479 housing units received a foreclosure filing in Illinois.
The foreclosure laws of Illinois State permit only judicial foreclosure process through the County Court. A typical foreclosure process ends in a Sheriff Sale with the concerned property going to public auction; the process takes approximately 300 days.
Now the question is how a foreclosure affects the distressed home owner when their property is caught under foreclosure. The direct effect, apart from losing their property is the drop of their credit score in their overall credit rating.
Every American is valued in the financial market for all his activities - right from buying groceries in a department store to a mortgage loan for buying a property - based on their Fair Isaac Credit Organization (FICO) credit score. In the case of buying properties through a mortgage loan, the application is evaluated by the individual credit score of the person concerned. The mortgage lender obtains the detailed credit history of the applicant, from one or all of the three Credit Bureaus - Experian, Equifax, and TransUnion.
Normally the credit score of a person is determined based on their entire history of using credit for the last 7 year period and the entire picture will be taken as a whole. In the case of foreclosure, the drop in credit score of the borrower depends on many factors. If there are many positive marks, like many bills they are current on, other loans paid-off or on time, the foreclosure will not impact them heavily. Their credit score will only suffer minimally, once rebuilt they can have an ability to borrow after a few months to a year.
On the contrary, if there are numerous late payments on other loans, a foreclosure can destroy their credit score, dropping it by many points. Such victims of foreclosure will be unable to borrow any money for several years, let alone another mortgage loan. Thus, the overall picture of their credit history is important, rather than just one part or another.
The credit score is expressed in numbers between 300 and 850 and is vital in decision making by mortgage lenders for home loans. A high score denotes low risk and a low score means high risk. So the foreclosure victims have the ability to ruin their future financial activities depending on their credit score, affected by the foreclosure. If they have a high credit score they will be offered a mortgage loan with lowest interest rate and lowest down payment. This can be explained by the following table as how their credit scores will affect the monthly payments of a 30-year, $150,000 mortgage loan:
Score Interest Rate Monthly Payment
720 - 850 5.49% $851
700 - 719 5.61% $862
675 - 699 6.15% $914
620 - 674 7.30% $1,028
560 - 619 8.53% $1,157
500 - 559 9.29% $1,238
In conclusion, you can see from the table above that it pays (literally) to have a stellar credit score. With a high score you are considered less of a financial risk to the lender. You should do what you can to protect your score. Therefore, if you have trouble making mortgage payments, seek help immediately. Schwaps would be glad to help, but we don't mind if you contact another company. The main priority is that you obtain assistance. You may prevent foreclosure, save your credit, and your house, if you take action soon enough.
The foreclosure laws of Illinois State permit only judicial foreclosure process through the County Court. A typical foreclosure process ends in a Sheriff Sale with the concerned property going to public auction; the process takes approximately 300 days.
Now the question is how a foreclosure affects the distressed home owner when their property is caught under foreclosure. The direct effect, apart from losing their property is the drop of their credit score in their overall credit rating.
Every American is valued in the financial market for all his activities - right from buying groceries in a department store to a mortgage loan for buying a property - based on their Fair Isaac Credit Organization (FICO) credit score. In the case of buying properties through a mortgage loan, the application is evaluated by the individual credit score of the person concerned. The mortgage lender obtains the detailed credit history of the applicant, from one or all of the three Credit Bureaus - Experian, Equifax, and TransUnion.
Normally the credit score of a person is determined based on their entire history of using credit for the last 7 year period and the entire picture will be taken as a whole. In the case of foreclosure, the drop in credit score of the borrower depends on many factors. If there are many positive marks, like many bills they are current on, other loans paid-off or on time, the foreclosure will not impact them heavily. Their credit score will only suffer minimally, once rebuilt they can have an ability to borrow after a few months to a year.
On the contrary, if there are numerous late payments on other loans, a foreclosure can destroy their credit score, dropping it by many points. Such victims of foreclosure will be unable to borrow any money for several years, let alone another mortgage loan. Thus, the overall picture of their credit history is important, rather than just one part or another.
The credit score is expressed in numbers between 300 and 850 and is vital in decision making by mortgage lenders for home loans. A high score denotes low risk and a low score means high risk. So the foreclosure victims have the ability to ruin their future financial activities depending on their credit score, affected by the foreclosure. If they have a high credit score they will be offered a mortgage loan with lowest interest rate and lowest down payment. This can be explained by the following table as how their credit scores will affect the monthly payments of a 30-year, $150,000 mortgage loan:
Score Interest Rate Monthly Payment
720 - 850 5.49% $851
700 - 719 5.61% $862
675 - 699 6.15% $914
620 - 674 7.30% $1,028
560 - 619 8.53% $1,157
500 - 559 9.29% $1,238
In conclusion, you can see from the table above that it pays (literally) to have a stellar credit score. With a high score you are considered less of a financial risk to the lender. You should do what you can to protect your score. Therefore, if you have trouble making mortgage payments, seek help immediately. Schwaps would be glad to help, but we don't mind if you contact another company. The main priority is that you obtain assistance. You may prevent foreclosure, save your credit, and your house, if you take action soon enough.
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