by Tamara Brown

Created on: April 18, 2009

Going through a home foreclosure is difficult enough, but unfortunately the struggle doesn't end when the keys are sent back to the lender. A foreclosure will also affect your existing credit cards, even if you have been able to keep current with your payments.

The most likely way that a home foreclosure will affect existing credit cards is through the universal default clause. The credit industry is the only industry that can raise the price after you have consumed a service. It is akin to getting your hair cut on Monday and then being asked on Friday to make an additional payment because the price has gone up since then. The universal default clause is contained the small print of most credit cards. It says that if you default on any payment for any debt, the company has the right to change the terms of your credit.

This clause will mean that your APR will probably be raised. If you find this happening to you, it is a good idea to call your credit card company directly and try to negotiate a better rate. If they stubbornly refuse to work with you, explain that since you have already gone through a foreclosure, your credit is already shot. If they won't be reasonable with you by lowering your APR so you can make your payments, you will just stop making payments altogether (don't actually stop making payments, just make the threat).

Another effect of a foreclosure on your credit cards is that your credit limit might be lowered to just above your current balance. Many people are also finding that their cards are being cancelled altogether once they pay their balance down to zero. Make sure that you read each of your credit card statements as they arrive in the mail so you are not caught unaware of the lowered limit. This will help you avoid costly over the limit fees.

At this point it may seem like the credit card companies have become your enemy. However, in some ways, your existing credit cards can be of help. Making consistent, timely payments can help you to slowly rebuild your credit score. It may take awhile, but eventually, it is possible to restore your good credit.

In the meantime, it is important to remain informed about any changes to your existing credit cards. By law you must be given 15 days notice regarding any modifications to your account, so be vigilant in reading any material that your credit card company sends you. Also be sure to notify each company of your new address so that bills won't be lost in the mail.

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