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Short Sale, Foreclosure & Your Credit Score

Updated: Oct 23, 2014

Highlights

  • The higher starting score, the longer it takes for the score to recover.
  • There is little difference between a short sale and a foreclosure on a FICO score.
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The Higher a Consumer's Credit Score, the Farther it Will Fall With a Short Sale, Bankruptcy, or Foreclosure.

A common question among Bills.com readers is how a short sale, foreclosure, or bankruptcy impacts a consumer’s credit score. Another common question is how long it takes to recover from one of these devastating events. The maker of the FICO credit score, Fair Isaac & Co., released two tables that show how a short sale, foreclosure, and bankruptcy degrade the score of a consumer starting with a low, medium, and high score. In general, the old adage, “The higher they climb, the farther they fall,” holds true for credit scores.

Here are Fair Isaac & Co.’s tables:

Harm to FICO Score

  Consumer A Consumer B Consumer C
Source: Fair Isaac & Co.
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 balance) 575-595 570-590 620-640
   Foreclosure 575-595 570-590 620-640
   Bankruptcy 530-550 525-545 540-560

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Time to Full Recovery

  Consumer A Consumer B Consumer C
Source: Fair Isaac & Co.
Starting FICO score ~680 ~720 ~780
FICO score time to recovery 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 balance) ~3 years ~7 years ~7 years
   Foreclosure ~3 years ~7 years ~7 years
   Bankruptcy ~5 years ~7-10 years ~7-10 years

Fair Isaac notes the time to recovery estimation assumes the consumer does not open any new accounts, have any other delinquencies, and all three hypothetical consumers started with the same debt balance.

Also, Fair Isaac points out that in the second table, the time to recovery is for a full recovery, and that a partial or even a half-way recovery is still significant.

Each state legislature created unique foreclosure and anti-deficiency laws for each state. Follow the links just mentioned to learn the foreclosure rules relevant to you.
4.5
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(6 Votes)