If you are facing a foreclosure or cannot sell your home at its market value, a brief sale may be your proverbial last-ditch choice. A brief sale is a real estate sale for less than what is owed on the mortgage. The creditor agrees to the reduced price in exchange for avoiding a protracted and expensive foreclosure. But as it often is with last-ditch options, short sales include negative effects you should think about before committing to one. High on the list of negatives is the effect that a brief sale may have in your credit score, the score system creditors, landlords and employers use to assess the reliability or creditworthiness of a customer. Among other things, your credit score and credit score can affect your chances of leasing an apartment, implementing successfully for a mortgage, and the rate of interest you pay on credit cards.
Do Short Sales Affect Your Credit?
Yes, brutally. According to FICO, the company that developed the most widely used credit score system, a brief sale is just as poor, from a credit perspective, as a foreclosure or a deed-in-lieu of foreclosure. This is because creditors report a brief sale as a”not paid as agreed” account; the same term used to refer to foreclosures. This does not mean that short sales do not have significant financial advantages over a foreclosure, but they do not provide any credit score benefit. But if you can negotiate with your creditor to report your short sale as a account”paid in full,” you can avoid negative consequences on your credit score.
What Impact Will A Short Sale Have On My Credit?
It depends on your credit score prior to the sale that is brief. The higher your credit score, the more severe the effect. By way of instance, a borrower with a score of 680 will require a hit of 85 to 105 points. However, borrowers with scores of 780 will see their credit score fall 140 to 160 points.
How Long Will A Short Sale Remain On My Credit Report?
A sale will appear on your credit report for seven years. The good news is the older a negative thing is, the less effect it has on your credit score.