Short Sale vs. Foreclosure
Short sales appear on your credit report as "pre-foreclosure in redemption", not as "debt discharged due to foreclosure". There is less impact on your credit score with a foreclosure if its a purchase transaction. Those who have taken out a refinance or cash out, may be impacted with a judgement which will continue to hold down scores....Short sales that may result in collection or judgement activity will cast a negative pallor on your credit for years to come versus something that gets finalized. Foreclosures that show all mortgage debt as fully discharged are better than any continuing hit, ie with late payments or pending short sales.
It has been determined that a drop of 100-150 points on your scores will occur with a short sale vs a 150-200 drop on your scores for a foreclosure. However, it depends on the impact of continuing reporting.
A foreclosure and short sale will have less impact when about 2 years have elapsed. The newer fico score formulas, namely fico-08, give more credit to recent history, rather than older history - when compared to the older formulas. If you can maintain other payments and a good history with other accounts, the affects of a foreclosure will help mitigate this bombshell.
When can you purchase a home again ? That really depends on the lending markets. FHA and most government backed programs will require at least 3-4 years for this to be mitigated with other positive credit on your report. The negative information will stay on your report for about 7 years, and is very difficult to remove.
If your in trouble with a job loss or other lasting impairment on your ability to repay bills, but see light, it could be recommended to continue paying other debts. If your impairment is going to be longer than say 2 years, you may consider closing all accounts and letting them rot. With a foreclosure and other negative information, the longer you wait until you stop paying, could mean that you have longer to wait until the 7 year healing proces begins.
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Credit And Foreclosure / NOD / Shortsales
