Is a Foreclosure as Damaging to Your Credit as we Thought?

We tend to believe that a foreclosure is a nuclear event to our credit health; however, new research indicates that it is often not the case.

In 2008 the housing market bubble burst and we entered what the industry is calling the Housing Market Correction. At its peak in 2010 the U.S. housing market had an estimated 2.9 million foreclosures. In 2018 the number dropped to its lowest point at around 600,000. But is a foreclosure a nuclear event to your credit health?

Turns out new research is showing that most credit scores begin to bounce back after two years and in most cases is completely off your credit record after seven years. According to a recent article from,  “At first, a foreclosure can cause credit scores to drop by 150 points or more, but many borrowers still maintain a high score afterward, Lending Tree researchers found. In fact, 7% of borrowers end the year of foreclosure with a score above 680 – and 2% finish above 740.”  The higher your credit score is when you begin a foreclosure the larger the hit to your credit, but your credit will drop before a bank files for foreclosure as they report 30-60-90 days missed without a payment to your mortgage.

This is not to say that a foreclosure is not damaging, and it certainly has effects that extend beyond your credit score. Foreclosures should still be avoided and a short-sale is even less damaging to your credit score if that can be arranged, but at least we know that you can recover from a foreclosure and return to the life-style of a home owner.

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