Will a Short Sale Hurt My Credit

Will a Short Sale Hurt My Credit?

If the owner of the property sells the property in less than the amount that he owes to the lender, then it will be called Short sale. If the owner can pay off the due amount to the lender then the owner’s credit will not be affected much but if the owner seller for a short sale to avoid foreclosure then his credit will be affected.

It is better to say that short sale will certainly affect your credit score but not as much as foreclosure. Your credit score will be dropped by 100 to 150 points if you go for a short sale but if you face foreclosure then your credit score will be dropped by 250 to 300 points and you may not be able to get approved for home loans for 7 to 10 years. But in case of short sale, if you improve your credit score then you may be able to get approve for a mortgage loan in one and half years.

You cannot go for short sale to avoid foreclosure without the permission of the lender but the good thing of the short sale is that you need not pay the difference between the amount you owe to the lender and the sale proceeds. But this amount will be considered as your income and you are required to pay tax on that amount.

There are other options too to avoid foreclosure and even after short sale if you start making payments to all your bills on time then you can improve your credit within a very short period of time.