Short Sale vs. Foreclosure

Generally, foreclosures remain on a seller’s credit report for 7 to 10 years. Each of the credit reporting agencies, Transunion, Equifax and Experian all have their own proprietary systems for creating their credit scores. Therefore, it is difficult to predict the negative effect a foreclosure will have on your credit score, however, generally, foreclosures are worse than bankruptcy from a credit standpoint; causing up to a 250 point drop in your credit score. Importantly, short sales cause the least amount of credit harm and are only on a seller’s credit report for 3 to 5 years. The range of harm from a short sale may be as little as 50 points.

Finally, the credit markets are beginning to consider prospective buyers with short sales on their credit histories for new loans.  Sellers who want to purchase a new home again in the future, if not immediately, will be able to sooner after a short sale than after a foreclosure.