Rebuilding credit after a Foreclosure or Short Sale

By Aurora Olivares, Housing Counselor at Project Sentinel, one of the members of ForeclosureHelpSCC

Building and maintaining credit is frequently on the minds of homeowners here in San Jose and Sunnyvale.  It’s no secret that your credit takes a hard hit during and after a foreclosure or short-sale.  Once you are more than 30 days late on your mortgage, it will be reported on your credit report, and your credit score will be impacted negatively. To learn more about how a foreclosure, a short sale without a deficiency, a short sale with a deficiency, and a bankruptcy impact three typical homeowners, read the FICO Banking Analytics blog posting: “Research looks at how mortgage delinquencies affect scores.

As homeowners are unable to pay their mortgage or secure a workout with their lenders, they may fall further behind on their payments, and their credit report will worsen.                 A homeowner’s credit is impacted throughout this progression until the entire delinquency is resolved.

Let’s fast forward.  What happens after someone goes through the foreclosure process? 

The foreclosure proceedings are reported to the credit bureau by your lender and will be noted on your credit report for the next 7 to 10 years.  However, this doesn’t mean that you can’t re-build your credit after a foreclosure or short sale and become a homeowner again.

Here are 5 tips on how to rebuild your credit so you can prepare yourself if you decide to purchase a home in the future or need to apply for other types of credit after going through the foreclosure process.

  1. Pay your debts on time.  Paying your minimum monthly payment on time will reflect positively on your credit report.
  2. Keep low balances on your credit cards.  If you have a credit card with a revolving balance, try to keep the balance at about 30% or less of the overall credit limit for that account.  For example, if your credit limit is $10,000, you should try to keep your balance below $3,000.
  3. Pay more than your minimum monthly payment.  By simply paying $1 more per month than your required minimum payment, it will register positively on your credit score.  It could be $1 or $100 more than minimum amount you are being billed.  Use this method to maximize your ability to pay off debt faster and start to rebuild your credit.
  4. Keep your older credit accounts open.  The longevity of an account plays a role on how your credit score is calculated because potential lenders like to see that you have a history of using credit and paying your bills.  Therefore, if you close an older account, it’s going to negatively impact your credit score.  If you need to close credit accounts, consider eliminating newer accounts first.
  5. Avoid quickfix schemes.  Claims to be able to fix your credit in less than 90 days may not be the most dependable outlets.  If it sounds too good to be true, it probably is.  If you decide to seek professional assistance to help resolve your credit issues, make sure they are a reputable organization.  One quick way to research if an organization is providing legitimate credit counseling assistance is to see if they belong to the National Foundation for Credit Counseling, a nonprofit, membership organization which holds its member agencies to high standards.  Visit their website: to learn more or to find a credit counseling agency close to you.

In conclusion, rebuilding your credit report and score after a foreclosure or short sale will take time and dedication and there are no “quick fix” schemes to fix your credit.

If you haven’t already, you may want to obtain your free credit report. And a reminder from the Federal Trade Commission: is the ONLY authorized source for the free annual credit report that’s yours by law. The Fair Credit Reporting Act guarantees you access to your credit report for free from each of the three nationwide credit reporting companies — Experian, Equifax, and TransUnion — every 12 months.

If you are a homeowner living in San Jose or Sunnyvale and are struggling with your mortgage, please contact ForeclosureHelpSCC, a program funded by the City of San Jose and the City of Sunnyvale at (408)-293-6000 or visit our website  Our HUD-approved counselors can help you evaluate your options, learn more about federal and state programs that may help you with your mortgage issues, and will help you create a plan forward.

Please note: All content included in the ForeclosureHelpSCC blog is provided for information only and should NOT be considered legal or tax advice. If you have any questions, please feel free to contact us on our hotline: (408)-293-6000, or visit our website:

8 thoughts on “Rebuilding credit after a Foreclosure or Short Sale

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