Have to face a hardship? That is sure unfortunate, and you will have to bear with it. What makes the situation worse is the fact that any hardship is not a story of just the present. Unfortunately its effects are carried onto the future as well, and can significantly impact your real estate portfolio and credit rating. Whether you require a loan now or will need it later, a hardship is just going to make the approval phase all the more difficult for you than it already is.
When you go to a hardship, your credit rating plummets down. You can increase it but it requires a lot o time, several years in fact. As such, the best thing is to stay out of hardship because you will probably not want to face the consequences. Here is a quick look at just how damaging a hardship can be.
Credit History
A hardship can result in negative actions being recorded on your credit history while significantly reducing your score. You may have trouble in maintaining your debts, and so you might make late payments. In some cases, all this may lead to a continuous delay in your payments as a result of which your loan may be handed over to a collection agency. True, it is just one loan that you mismanaged, but it will still have multiple effects on your credit history. And the bad thing is, though you can improve your score in future, there is no way that you can wipe off what goes in your credit history.
Credit Score
Since a hardship puts a negative light in your credit history, your credit score also suffers because of it. For instance, assume that you default on a mortgage, and your lender decides to foreclose on your real estate property. The effect of this one act can reduce your credit score by anything that lies in between 130 and 230 points, which is quite a massive range. If along with this, you start delaying your payments or the like, your history will be devalued and your score will be further lowered.
There are certain specific situations in which you might be able to reach some negotiation terms with your lender. He may consent to changing the mortgage terms or providing you with an option that could somewhat better the situation. However, your credit score will still decrease
Real Estate
You might overcome hardship but it would take you eons to counter effect the consequences. You will have to spend several years before your credit score improves and information on your credit history will stay there or quite some time.
All this will affect your loans in the future and many lenders would not be keen to borrow you huge amounts. As such, it would be difficult for you to buy a new home or another real estate property soon enough. Most lenders refuse to provide you it a mortgage until the episode becomes two years old. For some others, you may have to wait even longer.
