Q: After taking forever to go through, my foreclosure was finally completed in January of this year. How badly has my credit score been affected from it? Can you get a credit card after foreclosure? I’m in California, if that matters.
A: Obviously your score has dropped, but by how much? The answer will be different for everyone, because it depends on what your score was to begin with. With foreclosures (or any other negative on your report) generally the rule of thumb is the higher you were to begin, the further you will fall.
According to Fair Isaac (the creators of FICO) you should expect a drop of around 85 to 160 points if you went through a foreclosure, short sale or deed-in-lieu, as discussed in this CNN article. The effect on your score will be the same regardless of which state you live in.
- If your initial score was 780 it would have dropped to 620 to 640 (140 to 160 point decrease).
- If your initial score was 680 it would have dropped to 575 to 595 (85 to 105 point decrease).
The foreclosure will stay on your credit report for 7 years. You will see it listed under the “public information” section which lists judgments, tax liens, and the like.
While 7 years may sound like a long time, the good news is that you can achieve a respectable credit score long before then. According to MyFICO’s website they say:
That’s even all the more reason to get started today on rebuilding. Credit cards are one tool that can help you do that.
Which credit cards should you try for?
Having a score with a “5” or “6” in front of it spells ones thing… subprime. And if you’re recently had a foreclosure, you now fall into that category. You are no longer viewed as being very creditworthy. But that doesn’t mean getting a credit card after foreclosure is impossible, it just means you have to lower your expectations.
To be approved for the best reward cards and at the lowest interest rates, you generally need to have a FICO that’s in the mid 700’s. With a recent foreclosure, you’re going to have to set the bar lower.
This leaves you with a couple options; secured cards and those for fair credit.
Option 1: Secured
With these types of cards, you have to put forth a security deposit to open them. But don’t worry, you will get that money returned to you in the future when it comes time to close the account (assuming your account doesn’t owe a balance when you close it).
Since you are basically underwriting some or even all of the credit risk with your deposit, these types of cards are not difficult to get approved for. Here is a list of some I recommend.
Option 2: Cards For Fair Credit
These are a step up from secured cards. They’re unsecured so you won’t have to pay a security deposit.
With these you probably won’t get a rewards program or the best interest rates, but at the end of the day, you still have a credit card which can help rebuild your history, if used responsibly.