Credit Implications

Borrowers/sellers who are pursuing a short sale may want to know how a short sale or foreclosure will affect their credit score. The answer is that it is impossible to specify the exact number of points by which a short sale or foreclosure will lower their credit score. Credit-scoring algorithms are complex and take into consideration a number of factors, including, but not limited to, the following:

  • Payment history
  • Amount of debt compared to credit limits
  • Length of credit history
  • Number of credit inquiries
  • Number of credit accounts
  • Types of credit accounts

In addition, when calculating an individual’s credit score, agencies compare the above information to the loan repayment history of consumers with similar profiles. The below table is a general guideline and is not intended to predict how an individual borrower’s/seller’s credit would be impacted by any of these events.

Comparing the impact of Short Sale and Foreclosure
Starting FICO Score 680 720 780
FICO score after these events.
30 days late on mortgage 600-620 630-650 670-690
90 days late on mortgage 600-620 610-630 650-670
Short sale/ deed-in-lieu/ settlement (no deficiency balance) 610-630 605-625 655-675
Short sale (with deficiency) 575-595 570-590 620-640
Foreclosure 575-595 570-590 620-640
Bankruptcy 530-550 525-545 540-560
Time for FICO score to recover after these events
30 days late on mortgage 9 months 2.5 years 3 years
90 days late on mortgage 9 months 3 years 7 years
Short sale/ deed-in-lieu/ settlement (no deficiency balance) 3 years 7 years 7 years
Short sale (with deficiency) 3 years 7 years 7 years
Foreclosure 3 years 7 years 7 years
Bankruptcy 5 years 7-10 years 7-10 years

Note: Estimates assume all else held constant over time (e.g., no new account openings, no other delinquencies, similar outstanding debt.)

Dylan Wolf
Realtor
RENE,SFR
Bellevue Commons
(253) 249-1221  |  (425) 462-8000  |  134386   |  dylanwolf@windermere.com