How short sales and foreclosures affect your credit report and FICO scores.

Both short sales and foreclosures have negative impacts on borrower’s credit reports, but a foreclosure is much more difficult to recover from. After a foreclosure, it will also take considerably longer to restore your credit rating once your financial difficulties are resolved than it would with a short sale.

Foreclosures, Including Deed-In-Lieu Foreclosures

Expect a loss of between 200-280 points on your FICO scores. A pre-foreclosure FICO of 675 could drop to as low as 395, essentially eliminating you from future credit approvals. It may be as long as three years before you can qualify for another home loan.

Short Sales

Expect some credit score damage, but nowhere near as much as with a foreclosure. FICO score reductions will be around 75-125 points and your credit report will show it as a ‘pre-foreclosure in redemption’ which is far less negative than a foreclosure. You will most probably be able to secure a new home loan in about a year and a half.

If you are considering a short sale, be sure to discuss your options with both your lender and a qualified Realtor. Choosing a Realtor who is a Certified Distressed Property Expert (CDPE) to handle your short sale will help to streamline the process for you. The short sale process can be quite convoluted, and selecting the right Realtor to represent you can be critical in both getting your short sale approved and in reducing your stress levels during the short sale process.

Santa Clarita Realtor Linda Slocum is a Certified Distressed Property Expert (CDPE) and Certified Residential Specialist (CRS) specializing in Santa Clarita residential real estate and short sales. You can reach her at 661.670.0349 or at Linda@SantaClaritaRealEstateBlog.com. To search for Santa Clarita homes, use our neighborhood search tools or visit HoneyStartPacking.com.

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