Exciting Tuesday mortgage Q&A: “How does foreclosure affect your credit?”
Credit questions are never black and white, mainly because every consumer has a unique credit profile, making it impossible to pinpoint credit scoring impact.
But Fico released some interesting data about the effect of a foreclosure on different types of consumers’ credit scores, shedding a little light on an often disputed topic.
The company looked at two different credit profiles, one average (680 Fico score) and one excellent (780 Fico score) to detail how foreclosure would affect your credit.
Borrower A: 680 Fico score
Borrower B: 780 Fico score
Despite the two consumers having initial Fico scores that were 100 points apart, post-foreclosure, those scores would only differ by about 50 points.
Borrower A would see their credit score fall to 575-595, while borrower B would see it slip somewhere between 620-640.
You may be wondering why borrower B would take a bigger hit for the same derogatory event; simply because borrower A’s 680 score already reflects past risky behavior, so it’s factored in.
And though the gap would narrow between the two consumers, borrower A would fall into subprime status (below 620), while borrower B would still have a credit score in what some call the Alt-A realm.
Of course, both borrowers would be subject to the same rules with regard to obtaining a mortgage post-foreclosure (how long after foreclosure can I purchase a home?).
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