Reader's Question:
How does a short sale vs. foreclosure affect my credit report and credit rating?
Christian's Response:
There is no exact answer for that. FICO, which stands for "Fair Isaac Corporation" is responsible for generating what is known as your FICO score.
How does a short sale vs. foreclosure affect my credit report and credit rating?
Christian's Response:
There is no exact answer for that. FICO, which stands for "Fair Isaac Corporation" is responsible for generating what is known as your FICO score.
Fair Isaac began in 1958 by two individuals, Bill Fair (an engineer by profession) and Earl Isaac (a mathematician). Together, they developed a process that measures credit risk. Today, those scores and ratings are known as your FICO score.
Those rates are then turned over and reported to the three major consumer reporting agencies, Experian, TransUnion, and Equifax. The lovely employees at FICO which staffs over 3,000 employees will tell you there is no exact science to their rating system rather it's a system of blending numbers, percentages, and ratio's.
Here's what I can share with you after being in this business for 10 years:
FICO's change constantly. Creditors report to Fair Isaac every 30 days. The numbers I'm about to share with you are based on our own client cases and FICO scores that we have followed over the years.
- If you are late on your mortgage you might experience a 20 - 90 point drop in your scores.
- If you complete a successful short sale, you can expect a drop of approx. 100 - 150 drop in your scores depending on how the lender reports back to Fair Isaac and the terms of your short sale agreement.
- If you foreclose-get ready to see a 250 point loss.
- Lastly, if you file for bankruptcy get ready for a strong hit of approx. a -400 points and a ding that will sit on your credit profile for the next 7 years.
Again, please do not take our figures as fact or a perfected science, rather a brief over view of what we've seen in real estate mitigation over all. Our goal is to help and assist as many homeowners we can. So use this as free, well researched advice that many pay thousands to find out about and it's offered to you gratis via this site!
