What effect will a short sale vs. a foreclosure have on my credit?
Foreclosure can remain on your credit for up to seven years while a short sale usually gets reported as a “settled debt” and is significantly less damaging. With a short sale, your FICO score will not be as negatively impacted as it would be with a foreclosure, and you will be able to get into a new home much sooner as well. We are not a credit counseling agency, but credit experts say that a foreclosure will typically reduce a borrower’s FICO score by 150 to 180 points and the borrower would usually need to wait more than 36 months before a lender will offer any kind of interest rate that makes sense. A short sale, on the other hand, will typically only result in an 60 to 90 point hit to the borrower’s credit and a significantly shorter waiting period before buying another home, usually about 18 months or less.
