A foreclosure on your credit record will probably lower your score around 260 points. That number is not definitive, however it is an approximate. Even if you have phenomenal credit it will lower your score to a negative number. There are very few situations where a foreclosure would be the best option.

There was a young couple who lived and owned a home in Minnesota. They bought their home at the end of the housing boom so they paid top dollar for it. Then they were transferred to California at the beginning of the housing crisis and could not afford to sell their home as they would have to sell it for much less than what they owed.

They decided to rent the house, but again because of the housing crisis they were only able to rent it for $1000 less than their monthly mortgage payments. The husband, who was the bread winner, worked in the banking industry and was laid off a year later because the housing crisis infiltrated the banking industry. At this point the couple had to choose between paying a mortgage on a house they no longer live in, or pay rent so they have a roof over their head. They ran through all of their options with the mortgage company but their lender was not willing to let them do a short sale or loan modification and they had no choice but to foreclose on their home.

The above scenario is a very unique case of someone who has gone through all of the options and foreclosure was the best choice. However it will do the most damage to your credit score. If you are in this situation you should consider all of your options.

Contact your mortgage company and see if they will allow you to do a short sale. There is some debate as to whether a short sale will adversely affect your credit. Some say that as long as you stay current with your mortgage payments during the course of the sale you it will not show up on your credit record. However if you are in a situation where you have to put the house up for a short sale you may not have the funds to pay full mortgage payments. Mortgage companies also will not grant you a short sale if you cannot provide proof that a short sale is necessary.

Continued late payments will also adversely affect your credit report dramatically. Your best course of action would be to talk to your Mortgage Company As Soon As Possible and try to work out a solution before you are deficient on your loan. Ask them about doing a loan modification to lower payments.

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