Will a Foreclosure or Short Sale effect my Credit Scores?

Reporting is up to the lender, but generally, a short sale is going to cause about the same amount of damage to your credit report and FICO score as a foreclosure.

Effects on your credit report

There is no doubt that you will have much more damage to your credit report with a foreclosure than with a short sales. It will also take much longer to repair and restore your score once your financial difficulties are resolved.

For a Foreclosure

Expect about the same things to take place. Quite often this means a loss of between 200-280 points on your FICO score. A pre-foreclosure FICO of 675 could drop to as low as 395, essentially eliminating you from future credit approvals. It may be as long as three years before you can qualify for another home loan.

For a Short Sale

Expect to have some credit score damage, but nowhere near as much. Loss of FICO points will be around 75-125 and your report will show it listed as a ‘pre-foreclosure in redemption’ which is far less negative. You will most probably be able to secure a new home loan in about a year and a half.

It would be a good idea to consult with a lawyer, tax accountant (CPA) or a good professional real estate agent who is experienced with short sales. So don’t consider doing this alone. Get the help you need.