What Are The Credit Score Impacts of a Short Sale, Foreclosure, or Bankruptcy?
According to myfico.com, if you are delinquent on your payments the credit score impact is no different than if you were to foreclose on your property or do a Deed in Lieu of foreclosure. It will be reported on your credit as “Not paid as agreed.”
Despite this pronouncement from FICO, your credit score will not be as affected with a short sale as with a foreclosure because the process is typically shorter. The foreclosure process can drag on for many months whereas a short sale can bring a quicker resolution for the distressed borrower. Typically the credit hit is about 50-80 points per mortgage that you are delinquent on. There are also other benefits to short selling your home rather than foreclosing on your home. (SEE LINK)
If you short sale while current, your credit score does not decline as much. Please click here for details on short selling while current.
If you were to file bankruptcy instead, the credit affects are usually greater, because you are bankrupting multiple credit lines whereas a foreclosure or short sale is only one or two credit lines depending on how many mortgages you have. However, if you were to file bankruptcy, your credit score may be higher in a year, because you will not have all the high credit balances on your credit report.
If you have other trade lines open and make timely, complete payments your credit score will bounce back much sooner. Be prepared for higher interest rates and lower available balances on unsecured credit lines such as credit cards.
Please feel free to contact us today so that we may discuss the options that are available to you.
Van and Associates Law Firm at 702-529-1011