Will A Short Sale Hurt My Credit?
Of all the questions I get, the most common one is “will a short sale hurt my credit score”?
The answer is, the short sale is hurting your credit as much as you deciding not to miss mortgage payments.
A short sale is usually reported as “Paid in full but less than agreed – Settled” which is what we call an adverse report. We all would like “Paid – Satisfactory.”
But “Paid in full but less than agreed – Settled” is not a charge off. It’s not a foreclosure. It’s not a delinquent or late payment.
In fact, you can often do a short sale and never make a single late payment. This will help keep your credit scores sinking. The lender can still approve the short sale and you can get out from under while you have not ever been late.
If you are very concerned with your credit rating on a short sale, this is good news.
There are times when a short sale will hurt your credit, though. Certainly, if you are late with your payments, the lender will often report this each month. So I see a lot of short sales where the borrower’s credit is hurt because of the delinquencies before the short sale.
Also, credit bureaus pick up public records in their reports on you. If a lender files a “notice of default”, or NOD, with the county courthouse, that may show up on your credit report as a public record search. This is how bankruptcies and judgments are picked up — through a public record search and nothing to do with what a lender or credit grantor says about you.
There isn’t much I can do to remove an accurate honest public record report like a notice of default. But if you do a short sale, you can show your lenders in the future that you settled the obligation and it is not a foreclosure.
