How Does a Sheriff’s Sale Affect Your Credit Score?

If you are expecting to go through foreclosure or your property is going to be sold at a sheriff’s sale, you may be concerned about the potential consequences of that sale. You likely know that you will not have ownership of that property anymore, and you likely understand that you will not be in debt to your creditors once the property is sold. However, there are also credit score implications for having a property sold at a sheriff’s sale.

Having your property sold at a sheriff’s sale will affect your credit score in a negative way. The particulars of your foreclosure process that led up to the sheriff’s sale have a direct impact on how significant the effect on your credit is. In general, the later your mortgage payments are past due, the worse the effect will be on your credit score. However, retaining legal counsel can help prevent or mitigate the negative effects of a sheriff’s sale on your credit.

For a free analysis of your situation, call Young, Marr, Mallis & Associates’s foreclosure defense lawyers at the number (609) 755-3115 for matters in New Jersey or (215) 701-6519 for matters in Pennsylvania.

How Sherrif’s Sales Impact Credit Scores

Make no mistake, having a property foreclosed on and subsequently sold at a sheriff’s sale will have a negative impact on your credit. The exact impact will depend on the nature of the situation that led to the foreclosure and sheriff’s sale. If the missed mortgage payments that led to foreclosure were only slightly delinquent, the impact on your credit score may be minimal. However, if your missed payments were extremely late, foreclosure and a subsequent sheriff’s sale can have an extremely negative impact on your credit.

Additionally, the impact on your credit is somewhat proportional to your credit prior to foreclosure. If your credit is high before foreclosure, you will lose more points than if your credit score was lower to start with. For example, according to Fair Isaac Corporation (FICO), the main tool used by lenders to determine credit, someone with a “high” credit score will lose somewhere between 140 and 160 points due to foreclosure or a sheriff’s sale. Conversely, an individual with a lower credit score of 680 will lose only 85 to 105 points. This is partially because there are simply fewer points to lose and partially because once credit is damaged, subsequent negative impacts on credit are less important because the credit score is already not good.

How Do Lenders View Foreclosure and Sheriff’s Sales?

Foreclosures and sheriff’s sales are not viewed favorably by moneylending institutions. In fact, they are seen as some of the most serious red flags out there, only under being in the midst of bankruptcy proceedings. It will be very difficult to take out a loan if you have a property foreclosed on or are currently going through foreclosure proceedings. Many lenders may even outright refuse to give you a loan if they see that your property has been the subject of foreclosure or sold at a state sale.

All that being said, every lender will have different standards for the level of perceived risk they are willing to accept. Moreover, lenders may become more lenient and understanding of your situation as time passes, especially if you can show that you have things under control in years following foreclosure proceedings.

Ways to Improve Credit After a Foreclosure and Sheriff’s Sale

Since credit is negatively impacted by foreclosures and sheriff’s sales, many people who go through those experiences will be looking to work towards rebuilding their credit. There are many ways to do this, and our foreclosure defense lawyers are ready to advise you on the best courses of action for your situation.

Pay Bills on Time

Arguably, the most effective way to improve your credit is to pay your bills consistently and on time. This shows financial institutions that you will not leave them out to dry when they loan you money. Ultimately, credit is a measure of how likely you are to pay someone else back, so actually paying what you need to is a good way to boost your credit score.

Property Manage Credit Cards

Another method for building credit is keeping credit card balances to a minimum. Making credit card payments in a timely fashion will improve your credit score over time by showing that you can pay your debts.

Some common advice regarding using credit cards to improve credit involves leaving some of the balance unpaid so that it generates interest. Doing that is a risky proposition for building credit, as you are not, in fact, paying off the entirety of your bill. It is better to pay off your credit card debt in full and on time to rebuild your credit.

Avoid Large Purchases

Sometimes, it cannot be helped, but minimizing the number of large purchases you make can improve your credit. First, smaller purchases are easier to pay off. Second, it shows that you are trying to be financially responsible by avoiding large purchases that may put you at risk of failure to pay debts on time.

Be Patient

Above all, you need to be patient when rebuilding credit. There is no way to rebound from a diminished credit score overnight. The only way to rebuild credit is to work hard at it over a long period of time, so stick with it and trust that things improve over time. If you are responsible with your purchases and timely with your repayments, your credit will improve.

Let Our Foreclosure Defense Lawyers Help You Out Today

Contact the foreclosure defense lawyers from Young, Marr, Mallis & Associates by calling (609) 755-3115 for the state of New Jersey or (215) 701-6519 for the state of Pennsylvania to get a free analysis of your situation.