Advice on Short Sale When Compared to Foreclosure

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READER QUESTION

Does short sale affect your credit score the same as a foreclosure?

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Bills.com Resident Expert
Dec 12, 2011
BILL'S ANSWER

Editor’s note: See the Bills.com resource Home Affordable Foreclosure Alternatives Program for an updated discussion of deeds in lieu of foreclosure and short sales.

A short sale is a process in which the mortgage holder agrees to accept less than the balance owed on the mortgage at sale to prevent foreclosure. The lender would much rather see you sell the property than be forced to take the property through foreclosure, as foreclosure is a costly and time-consuming process.

A short sale will appear “Paid,” but there will be a note saying “account legally paid less than balance on account.” It will harm your credit score. It is not quite as bad as a foreclosure, but a short sale will harm a homeowner's credit score. It indicates that you took on a debt you did not honor.

I hope the information I have provided helps you Find. Learn. Save.

Best,

Bill

Bills.com

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