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California Debt Blog: Credit Score Impact: Short Sale versus Foreclosure

October 1, 2009 by Jonathan Stein

People ask me about the difference between a short sale and a foreclosure as it impacts their credit score frequently. There are no hard and fast rules. It depends on your situation. However, here are some guidelines:

A short sale will drop a credit score about 100 to 150 points. It depends on where the person is starting from. Most banks will not give a new mortgage for 12 to 24 months.

A foreclosure will drop a credit score by 150 to 200 points. Again, it depends on where they start from. Most banks will not give a new mortgage for 3 to 5 years. It is going to be very bank dependent, but the smaller banks and credit unions are more likely to give a new loan to someone who has had a foreclosure.

The best thing to do after a short sale or a foreclosure is to start rebuilding his/her credit right away. The best way to do this is to take a credit card with a zero balance, buy something small ($50 to $100) each month and pay off the balance immediately. This will get the credit score going back up quicker.

Categories: Credit, Current Affairs, News Tags: credit score, foreclosure, rebuilding credit, short sale

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