Your credit is one of the most important things about your financial profile. It is an insight for potential lenders and buyers on how you handle money. It’s also a preview on what they can expect from working with you. This is why so many people strive to maintain a good credit score. There are a lot of things that can affect your credit score, both good and bad.
One of those is a short sale.
A short sale is when you sell your home for less than the amount of the mortgage that you still owe. This usually occurs when you need to take an offer, even though it is low. You’re short on what you owe and if the bank accepts this then a short sale can be made.
A short sale often occurs when the owners finds themselves in financial trouble. If you are in this situation, it is better to move forward with a short sale than to go into foreclosure for many reasons other than credit. However, you still need to consider the impact it will have.
Simply put, short sales will have a major impact on your credit. Unfortunately, there is no way around this. In fact, moving forward with a short sale can set your credit score back 85-160 points. There are many factors that determine how big of a hit you’ll take. The biggest factors are your credit prior to the short sale, how short you are and the longevity of your partnership with your lender. If you move forward with this decision just know that a short sale will likely stay on your report for roughly 7 years. This is because it is considered a derogatory item and is a big thing for future lenders to be aware of. The best course of action to take after finalizing a short sale is to maintain excellent credit and stay in line with “credit-positive” behavior.
If you experience the need to move forward with a short sale, don’t panic. Creditors usually put more emphasis on recent activity so while it might stay on your report for a while, as long as you are doing things to move your score back up you will be fine. If you have any questions or want to talk about your specific short sale case, contact your lawyer today.