Short Sale Credit Score

“How does a short sale impact my credit score?”

This is perhaps the number one question about a short sale and for a good reason. Most people clearly understand that a derogatory credit score impacts your wallet in a very real way. It almost always costs you:

1. Time Inability to get a loan for a certain period of time resulting in missed opportunities.
2. MoneyIn the form of a higher interest rates and/or down payments on car loans, credit cards, insurance policies and mortgages, to name a few.

These kinds of loans are not cheap.


A short sale, deed-in-lieu and a foreclosure all have a negative impact on credit. However, nearly all credit experts agree that, “…lenders report a deed in lieu of foreclosure as a foreclosure, so the credit scores will carry the same serious effect as if it were an actual foreclosure.”  I have posted the credit bureau reporting  instructions issued to lenders by the Making Home Affordable program on how they are to report a deed-in-lieu on your credit score.

How will a HAFA short sale be reported on your credit?

On an FHA short sale, the instruction to your lender (from the Department of Housing and Urban Development) on how to report your short sale to the credit bureaus are as follows:
“Pre-foreclosure sales (short sales) must be reported to national credit bureaus. Mortgagees (your lender) must be careful to use the appropriate language or code to describe the transaction as a ‘short sale.” It should not be reported as a foreclosure, deed-in-lieu, or simply as a “paid-in-full.”

Short Sale Pros and Cons

Therefore, of the three possible liquidation options (short sale, deed-in-lieu, foreclosure), the short sale gives you more control over your financial future in the following ways:
1. The high probability of a better credit score than a deed-in-lieu or foreclosure;
2. Possible “Cash for your Keys” for relocation assistance (From $750 to $30,000);
3. The potential of having your lender release you from a deficiency judgment;
4. The option of moving out of your house on your terms instead of waiting to be told by the bank when you will be leaving via a notice taped to your front door with blue tape.

Short sale vs. a foreclosure, Side by Side Comparison
Government short sale programs: Check your eligibility.
How to start a short sale: Are you a good candidate for a short sale?
Request a callback from a Las Vegas short sale agent.

If there is someone telling you that a foreclosure avoidance method will lower your credit by only X amount of points … beware. Your credit score is unique to you and based upon a very specific formula involving many different credit factors. What we do know for sure is that the longer we wait to seek a solution, the longer you miss payments and severely damage your credit. So, are you ready to make a decision now and move forward with hopes of saving your financial future?

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