Foreclosure -vs- Short Sale
and the affect it has on your Credit Score
Pam Standlee owner of Credit Come Back shares this blog about the impact of foreclosure versus short sale and the affect on the individual’s credit score.
The common alternatives to foreclosure, such as short sales, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts, and considered the same by the scoring models. This is not to say that these may not be better options for you from a financial perspective, just that they will be considered no better or worse for your credit score.
The above actions remain on your credit report for 7 years, but its impact to your credit score will lessen over time. While these items are considered a very negative event by your credit score, it’s a common misconception that it will ruin your score for years to come. In fact, if you keep all of your other credit obligations in good standing, your credit score can begin to rebound in as little as 2 years (or less). The important thing to keep in mind is that a foreclosure or short sale is a single negative item, and if you keep this item isolated, it will be much less damaging to your credit score than if you had a foreclosure or short sale in addition to defaulting on other credit obligations.
If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact to your credit score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have a greater negative impact on your credit score.
Pam Standlee owner
Credit Come Back
1024 Iron Point Road
Folsom, CA 95630