Many people who have defaulted on a mortgage don't grasp how it affects their credit rating. It is one of the most destructive items that can appear on your credit report, but this doesn't mean that you'll never again be able to get credit after foreclosure.

When a mortgagor misses several consecutive payments on their loan, the lender usually files a notice of lis pendens or a notice of default, which begins the pre-foreclosure process. At this point, having missed several payments the borrower's credit scores have usually already taken a pretty significant hit. After the process has been completed, your credit rating could become downright toxic unless you take appropriate action.

The most important thing that you can do to repair your credit rating after foreclosure is to keep all of your other financial commitments current. The fact is, as disastrous as losing your home is to your life and your financial situation, banks understand that it can happen to pretty much anyone. The temporary loss of a job, an unexpected illness, or a rapid decline in your home's value are all major contributing factors to default, and often they're not a reflection of a person's ability or commitment to paying future bills. Creditors understand this, and will often be willing to work with you, provided that you show that your financial situation has become more stable.

It's important to build credit after foreclosure by paying all of your bills and settling any taxes after foreclosure you may have accrued. By doing something as simple as paying your cable bill on time every month, you're sending the message to lenders that you're committed to fixing your credit.

After seven years, a foreclosure will disappear from your credit report and (provided that you've built credit since then,) you should be able to put the whole mess behind you.