One of the hardest things to go through in life is a foreclosure and, unfortunately, it is happening more frequently as the economy continues to falter.  In fact, experts are predicting that foreclosures will peak in mid-2010 for this recession.

A common question being asked is “How does a foreclosure effect my credit?”

That is an important question and one that you should know the answer to, especially if you are one of those people that thinks that it may be easier to let the bank take the house rather than getting caught up on payments.

Foreclosures have a devastating effect on your credit score.  You will mot likely see your score fall two to three hundred points.  Even if you have an excellent score in the 800s, a foreclosure will take you down to the 500-600 range, making it nearly impossible to get new credit.  This means no new car loans, no new home loans, and no new credit cards.

Finding credit is not necessarily impossible after a foreclosure, but you can bet that you will pay extremely high interest rates.  The bad news is that you will be stuck in this situation usually for a two year period.

Foreclosure should be your absolute last resort.  Speak to your bank and see what can be worked out before opting for them to take over your property.  Remember, the bank doesn’t want to own your house.  They want you to make your payments.