- 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.
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 | |
|---|---|---|---|
| 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 |
Time to Full Recovery
| Consumer A | Consumer B | Consumer C | |
|---|---|---|---|
| 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.
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