Short Sales, Foreclosure, and Your Credit Score

When you are unable to continue making mortgage payments, you may opt for a short sale instead of foreclosure. A short sale involves selling your property for less than you owe. The bank that owns the rights to your mortgage can lose money on this kind of transaction, so they often try to foreclose instead of accepting a short sale offer. While there may be advantages to pursuing a short sale, choosing a short sale instead of foreclosure will probably not protect your credit score.

Damage of Short Sales and Foreclosure to Your Credit Score

Credit report watchdogs have observed that short sales and foreclosures affect credit scores about equally. Any differences are based not on the short sale or the foreclosure itself, but on your previous credit history. People with good credit may suffer substantial hits to their credit score whether they opt for a short sale or a foreclosure. Those with weaker credit histories may not experience major decreases after either a foreclosure or a short sale.

The damage to your credit score is a downside of foreclosures and short sales alike. On the upside, this means you may not need to consider the impact to your credit score when making a decision about how to terminate your lending agreement. You are free to consider other factors when weighing a short sale versus a foreclosure, since both have approximately equal effects on your credit report.

Contact Us

There are many things to consider when facing foreclosure or pursuing a short sale. A West Palm Beach foreclosure defense and short sale attorney can help you understand these options and may be able to help you navigate this complex process. Contact the Law Offices of Eric N. Klein & Associates, P.A. at 561-353-2800 to learn more.