What Will Be The Impact On My Credit?

One of the primary benefits of a successful Short Sale is avoiding the credit damage of a foreclosure. The damage to your credit done by a foreclosure lives on for years – at least seven years.

 Your credit will recover much quicker from the credit dings of a few late mortgage payments, if you keep your other accounts current. So, consider allocating your funds to meet basic necessities (food, utilities, household needs, auto expenses and such) first. Beyond paying for necessities plan to pay other bill to keep as many accounts current as possible.

  Keep “necessary” Accounts Current. 

When deciding which credit bills to pay review the terms of your credit accounts. If you are using a credit card to temporarily pay for necessities, you want to be sure to not jeopardize the availability of that account.

A Short Sale may be just one part of a larger effort to get through a tough period. We want to help make it possible for your credit to recover quickly. We need to avoid foreclosure – and that we can help with.

 The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event your credit status can encounter - worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit.

 The client’s ability to purchase a new home is dependent upon several factors. Credit is only one of the factors. We have seen cases where minimal credit damage was caused as a result of the short sale and the client repurchased within six months with little down and with an excellent rate. A lender is most interested in the borrower’s ability to repay the loan. If the problems that led to the Short sale are behind and there are at least twelve months of good credit with three or more credit accounts, he should be able to purchase with minimal down payment at a competitive interest rate.

 While it is up to the individual lender to decide what to report, what often happens is the loan will report as "paid" on their credit report. While that is good news, the bad news is that there will likely be a reference that says "settled for less than originally owed" or something similar. The credit scores will recover faster, with a loan “settled for less than was owed” than it will with a completed foreclosure. It is certainly more advantageous to have the short sale referenced than to have a foreclosure on their credit report.

By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly.