Foreclosure

If you are struggling to pay your mortgage, in spite of the current low Canadian mortgage rates, you may be wondering how-foreclosure-will affect your life, and what alternatives are out there. Foreclosure-has a serious and long-term effect on your credit history that you should understand before it happens.

Foreclosure-and Your Credit Score

Foreclosure-is one of the most damaging items you can have on your credit score, other than a bankruptcy, and it will stay on your score for at least seven years. This means that the effects of-foreclosure-are going to haunt you for a long time, perhaps even after you get your feet back on the ground after your financial difficulties.

The exact amount that your credit score will drop after a-foreclosure-is going to vary from case to case. If you have very good credit before you face-foreclosure, it may not have as devastating of an impact on your score as it would if you have less than perfect information on your score before-foreclosure-occurs. Remember, your credit score is made from all of your credit report information, not just one event, such as the-foreclosure.

Eliminating-a-Foreclosure

Once a-foreclosure-is on your credit score, you will have to take action to remove it. It cannot be removed for at least seven years. However, after seven years, you can have it removed, but you will need to ask. Write to all three credit reporting bureaus and ask them to remove the mark. Then, request a copy of your credit score to make sure that it has been removed.

How Low Credit Scores Affect You

If you have never had a low credit score, you may be wondering how it will affect you after foreclosure. Once you have lost your home in the-foreclosure-process, you will need somewhere else to live. If you want to buy a new home, you will have a hard time getting a Canada mortgage because of the-foreclosure-on your history. If your circumstances have changed, such as would be the case if you had been unemployed but are now employed in a secure job, you may be able to get a loan. However, you will find that the Toronto mortgage rates you are offered are much higher than the average rate, because you will be considered a high-risk buyer.

Even getting a rental will be a challenge with a-foreclosure-on your history. A low credit score will also affect your ability to get a loan for a car, a credit card, or any other type of debt. You may even find that getting a job is more difficult, because some employers check credit scores to determine whether or not an applicant is responsible.

Alternatives-to-Foreclosure

Because of the affects of-foreclosure-on your credit score are so devastating, it is best to avoid-foreclosure-if possible. Again, it does not ruin your credit forever, so foreclosure is not the end of your financial future, but if you can avoid it, you should.

One option is to see if you can refinance at a lower rate or for a longer period of time. Toronto refinance rates are low, so you might be able to lower your monthly payment by refinancing, if your credit has not already been damaged.

Another option is to talk to your lender. Lenders do not want to have a property go into-foreclosure, so they may work with you to lower your payment for a few months while you work through the problems you are facing. Even with mortgage rates Canada being so low, lenders still make the most money out of active loans, so they will want to keep the loan active if at all possible. However, make the effort before your loan goes into default, because lenders are typically unwilling to work with borrowers who have already stopped paying. Be proactive, and you may be able to avoid foreclosure altogether.