Will Congress Help Your Credit Score?

A bill that is moving through the hallways of Congress would not only prevent a new wave of foreclosures, but salvage the credit scores of hundreds of thousands of homeowners as well. Read on to find out whether it could help boost your score.

While many factors are considered, a foreclosure can leave a big black mark on a consumer's credit rating for up to seven years, according to Ethan Dornhelm, senior scientist of scoring solutions at Fair Isaac(FIC - Cramer's Take - Stockpickr), the company that developed the FICO score.

"The FICO score certainly going to take it into account for as long as it's found on the credit score," says Dornhelm. But, he adds, "if the consumer gets back on the horse shortly after the foreclosure ... as that foreclosure gets older and older, the impact will diminish."

The legislation would allow homeowners who are saddled with high-interest debt to refinance with safer, more affordable mortgages under a proposed $300 billion Federal Housing Administration program. Under current law, those consumers are too risky to qualify for government-backed loans.

Details are being ironed out House and Senate, but President Bush has promised a veto. The ultimate fate of the bill will have implications that could drastically alter a large swath of the country's finances.

Those with stellar credit scores who have not yet made a late payment stand to benefit most from the proposed bill.

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