How Will A Short Sale Affect My Credit?

Answer: This is a great question as there is a lot of misinformation on the internet about this topic. A Short Sale is recorded on your credit report as "debt settled for less than the amount owed". This typically will result in a relatively minor hit on your credit compared to a foreclosure or late payments on your mortgage. I say "typically" because it affects everyone's credit differently. The more established your credit, the less of an impact it will have on your score.

The reason you often hear and read that a short sale will drop your credit 100 points or more, is that, many people, when they do a Short Sale or not, 4 months of missed mortgage payments will have a significant negative impact on your credit. In other words, it is the missed mortgage payments that have the big impact on your credit, not the Short Sale itself.

With this said, if you are already behind on your payments, you have already incurred the majority of the hit that a Short Sale will have on your credit. Doing a successful Short Sale at this point will insure that your debt is settled with your lender.

If you are current on your payments and can stay current throughout the Short Sale process, you will save your credit to a large extent.

Finally, if you do stop making your mortgage payments, there are various credit repair agencies that can repair your credit by removing late payments from yur credit report after a Short Sale.