Will A Short Sale Affect My Credit?

A short sale will definitely affect your credit, but not nearly as bad as a foreclosure or deed-in-lieu.  The question that all homeowners want to know, is how bad of a hit will I take on my credit?

Your credit will not be affected as poorly as a foreclosure on your credit report.  There is generally a 50-80 point hit on your credit score, which appears as “debt settled”.   On the opposite end, a foreclosure will take 5-7 years to restore your credit to what it once was before the foreclosure.

The affects of a Foreclosure or Deed-In-Lieu of Foreclosure

We are seeing an average hit of about 200-280 points on your credit score.  According to debtkid.com “A pre-foreclosure FICO fo 675 could drop to as low as 395, essentially eliminating you from future credit approvals. ” We are seeing that it is taking about 5 years to apply for a new loan.

Consulting with a CPA

It is always a great idea to consult with a tax accountant regarding the tax ramifications of a short sale.  One may be charged for a consultation, but it is worth the knowledge of knowing where your credit will stand after a short sale.  It is important for homeowners to get the proper help that they need.  Make sure to work with people who have a strong understanding of short sales.