Credit Score: Forclosure or Short Sale?

During my last Credit Workshop, I was asked what is better for you a short sale or Forclosure. Well they are both bad, and whether you have a short sale or foreclosure, contrary to popoluar opinion you can get a FHA loan approval 36 months after short sale as been completed or forclosure has been settle.

With Short sales you know that the minute the deed has been transfered out of your name. With foreclosure that can be a little tricky. Because once you lost your home in foreclosure, it can take months, and sometimes years, if property is not sold right away. It’s 36 months after foreclosure has been settled.

Well, the other day, one of my personal mentors and coachs, John Ulzehimer, one of the developers of the FICO scoring model wrote this brief article about the effect of forclosure and short sales on your FICO scores!

“How will your FICO score consider a foreclosure?

There’s no denying that foreclosures are considered a very negative¬† event by your FICO score. With that said, it’s a common misconception that a foreclosure will make it impossible to rebuild your credit. In fact, if you keep all of your other credit obligations in good
standing, there’s a good chance that your FICO score could begin to rebound in just 2 years. Try to pay your auto loans, credit cards and any other credit obligations on time to limit the effect of this foreclosure.
Are other options better for my credit standing? Recently, several alternatives to foreclosure have become popular –¬† some of these include “short sales” and “deeds-in-lieu of foreclosure”. These may be viable options for you, and you should definitely do research to determine if these options make sense for your situation. However, as far as your FICO score in concerned, there is no difference between foreclosures and short sales or deeds-in-lieu of foreclosures. Each of these actions is considered an account that was “not paid as agreed”, and will have the same impact to your FICO score. I’ve got your back!!!¬† And remember, I helped build the darn thing!!!” – John Ulzehimer

Hope that helps you,

Carlos Samaniego
(909)512-6418

2 Replies to “Credit Score: Forclosure or Short Sale?”

  1. Wonderful read, thanks. It’s much clearer now what a credit report is really about and how it is helpful. Even if not in debt, keeping a well cared for credit score is really important.

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