Profile picture for Kmoore02

How does a short sale vs. a foreclosure effect your credit history differently or does it?

  • January 15 2011 - O Fallon
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Answers (4)

Profile picture for shasta_steve
While Steve is Zillow's resident nut job.  Google Steve.  He is correct that there is not a huge amount of difference between a short sale and a foreclosure, with all other things being equal.   Now how banks handle a short sale and a foreclosure are different and you will most probably end up waiting a little longer for a loan but not a huge amount.  I say all things being equal because if you "strategically default" on a single loan then your credit will only be a little worse than if you short sale the same loan.  Where these huge point drops happen during foreclosure is when people stop paying on many different accounts.  Agents throw out these huge numbers because they either do not know what they are talking about or are intentionally lying.  You take your pick

From personal experience I let a rental forclose a few months ago and my credit over 700 and climbing now.  My friends is around 740 and he did the same a few months before me.  I had one credit card cut my limit but the rest, including American Express, have not said a word.  By the way I think if your credit is otherwise good FHA will allow a new loan after 3 years on a foreclosure and 2 for a short sale, but the lenders would be better able to answer that than me. 
  • January 15 2011
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That is a lot of double talk.  They are both recorded as debt settled for less than owed and will carry about the same.  You have worse problems than a credit score.  98 per cent of short sales and foreclosures are fraudulent transaction and you are an accessory to that fraud.  Google foreclosure fraud cases and do your own research.  These real estate agents choose to remain in the dark because it justifies them selling bad titles to unsuspecting buyers - then try and claim ignorance.  Wake up!! The burden will ultimately be own your own shoulders.
  • January 15 2011
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A short sale will be reported more favorablly on your credit report than a foreclosure, as it will be listed as a paid debt (settled for less than bal. Owed) which is more positive than a straight unpaid foreclosure debt. Hope this helps!
  • January 15 2011
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Without a doubt sellers will incur more damage on their credit report by going through foreclosure. Typically your credit score will take plunge between 200 to 300 points. A short sale is a compromise between bank and seller. It shows the owner is trying to correct problem vs walking away from the home.
  • January 15 2011
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