personal credit question on short sale

Posted on 2015-02-03
Medium Priority
Last Modified: 2015-02-17
I wanted to know if anyone has some experience and or advise on the following question:

Previous to our marriage, my wife purchased a home and was forced to short sale the home.  Although we still need to check her credit later today, it seems like she may have some derogatory information on her credit.  How long does a missed payment and or short sale show up on her credit?  Is there anything we can do to clear this up?  We ran her credit from the Target school and it seems like she has FICO scores in the 730's; however, she's still seen as a risk, as far as credit is concerned.
Question by:uppercut7141
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Expert Comment

ID: 40588544
Yes her credit score will be affected. It is about the same as a foreclosure though a short sale is more of a voluntary sale than a forced foreclosure.
Her score may indeed go down 200-300 points.
Here is an article that explains it and as you see one agent found that the sale only caused the score to go down 100 points.
Better to expect the worse of 200-300 so you will be prepared.
The number of days late on paying the rent is also a factor.

As far as a buyer having to wait x number of years, Fannie Mae is an example where the wait time is 48 months. A foreclosure usually requires more time allowed, so in that one facet a short sale is slightly better.

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Expert Comment

ID: 40588551
Here are 5 steps to recovering your credit score after a short sale.
1. Get your credit report.
2. Cut expenses.
3. Double payments.
4. Pay on time.
5. Keep current credit card accounts open.

5. Is a very good idea. That helps restore your credit as your future reports will show that you kept making payments and were not late. Make it clear that the only blemish on your credit was "the house" and there may have been circumstances beyond your control that were specific to the house and it did not affect other creditors.


When I mentioned that a short sale is better than a foreclosure, here are several reasons though the affect on the credit score will be similar.

A short sale doesn't absolve the borrower from the debt the borrower incurred with the original mortgage, but it can be better than a full-on foreclosure.

10 reasons why a short sale may present a better option than letting your home slide into the long, draining process of foreclosure.

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Accepted Solution

dhsindy earned 2000 total points
ID: 40588955
Foreclosure and a short sale can lower your credit score and will stay on your credit report for seven years, I believe.  You can improve your credit score through credit rebuilding techniques such as listed above by nickg5.

Laws and credit actions depend to some extent on where you live (think local laws).  The impact of a short sale on your credit depends on several factors, including the way your lender reports the short sale to the credit bureaus (you can get a free credit report from each of the three  bureaus once per year - usually have to request in writing).  So, get reports and see how it was reported.  Most lenders will use the term “settled” for a short sale, which indicates that less than the full debt was repaid. If you can negotiate with your lender to use the word “paid” your credit will not be as badly damaged, but they seldom agree to this.

A credit score in 730's is more average.  If you could get it above 750 that would be good.  I am retired and had credit above  800.  When, I retired my credit score dropped to about 780-790 mostly I think because my income was decreased by about half.  I have a small mortgage and a vehicle loan.  I pay all other monthly expense and credit cards off every month.  I think this reduction in my score was income related.

So, I think your wife's income may be a factor.  You didn't say how long ago the short sale occurred.  Set up a good budget and write all your expenses or best estimates and incomes down.  Look at your cash flow and make sure your payments are made on time or earlier if possible.  Most interest is calculated on average daily balance so paying early will reduce interest if you are carrying a balance.  If you talk to your creditors, most will adjust your due dates so you aren't late or adjust the minimum due.  Do your best to stay on top of your situation.  I hate dealing with money matters but just hang in and do it.

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