Home > Blogs > California > San Bernardino County > San Bernardino > California > How Short Sales may affect your FICO score.

Helene Moore's Blog

By Helene Moore | Agent in Las Vegas, NV

How Short Sales may affect your FICO score.

Regardless of what anyone may tell you, both a foreclosure and short sale will have a negative impact on your credit, however, there is a difference in the severity of the damage between a foreclosure and a short sale.  A foreclosure will show on your credit as a foreclosure/repossession whereas a short sale will show as pre-foreclosure in redemption status or settled.  A foreclosure can prevent you from purchasing a home for 5-7 years whereas new Fannie Mae and Freddie Mac guidelines have changed the seasoning of a short sale to 2 years – which means you can purchase a home much sooner. 

Foreclosures also generally have a more severe impact on your FICO score.  Due to the high number of missed payments many people accrue over the course of their foreclosure most people report a drop of 200-300 points in their score.  If you are proactive about short selling your home you can reduce this number by acting quickly to get your home on the market and sold.  Most people who complete a short sale report a drop of 80-120 points in their credit score. 

The short sale process is also far more discrete than a foreclosure.  Your friends, family and neighbors do not need to know you are doing a short sale on your property and your property will be marketed like any other home for sale.  When the property closes escrow you will move out and move on with your life.  When your home is facing foreclosure the bank generally posts a notice of trustee sale on your property.  If the property does go to foreclosure and you or a tenant is living in the home there will be an eviction process followed by a listing – where it is generally marketed as a bank owned or foreclosure property.

A short sale allows you to get out of a home that is causing you a financial hardship without having to face foreclosure. I highly recommend that if you are considering a short sale you meet with a Real Estate Professional as soon as possible to reduce the impact on your credit and begin the negotiations with your lender..

Once again you may want to consult with a real-estate attorney  .


By Bob Alston,  Tue Feb 9 2010, 13:29
Thanks that is very helpful.

By Santarosaguy,  Tue Feb 9 2010, 13:36
Per FICO themselves, there's no real difference in your credit score between the alternatives. See the "Are other options better for my credit standing?" heading in:

You may be able to negotiate a different entry be reported on your credit report than the default, but that's a big 'if'.

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer