In many cases an individual will file a Chapter 13 Bankruptcy, to protect the real estate, initially, from foreclosure. When this is the situation, then the credit report would need to read “Bankruptcy” not “Foreclosure”. A major difference is, a bankruptcy will also need to correct a past due amount to zero. Past due amount will create a larger impact on the score than most other data that gets reported.
Account Transferred or Sold
Sometimes a mortgage lender may have reported the account as in foreclosure and then transferred the account to another company. If this is the situation, your efforts will need to be first directed to the lender that transferred the account. Until that company is notified and made aware of the current standing of the account then they will not update this account. They will need to correct this status to “Account Transferred or Sold” with a balance of zero and past due of zero.
Once this error has been corrected, the next step will be correcting the current mortgage company’s reporting. If this company reports this account as “past due and/or foreclosure” request the change of this error to zero past due and bankruptcy. These comments and corrections will improve credit scores.
Another example that is also a common error of reporting, will be an instance that the property had reached a foreclosure status and the individual had sold the property and paid the mortgage holder in full prior to the final step in the foreclosure process. When this happens, most mortgage companies do not correct this to a zero balance, zero past due, and no status of foreclosure should be reporting on the report. The reason why this needs to be corrected is the loan was satisfied, no foreclosure was finalized and it needs to report as such.