A short sale and a foreclosure can both have a negative impact on your credit, but the extent of the damage may vary. Generally, a foreclosure tends to have a more severe impact on credit scores compared to a short sale.
In a short sale, the homeowner sells the property for less than the amount owed on the mortgage with the lender’s approval. The lender typically agrees to accept the proceeds from the sale as full satisfaction of the debt. While a short sale will still be reported on your credit report, it may be listed as “settled” or “paid as agreed” rather than a foreclosure.
On the other hand, a foreclosure occurs when the lender takes legal action to repossess the property due to non-payment. This is considered a more serious delinquency and can significantly lower your credit score. Foreclosures typically remain on your credit report for seven years, whereas a short sale may stay for around two to four years.
It’s important to note that the impact on credit scores can vary depending on individual circumstances and credit history. Additionally, credit scores are influenced by various factors, so the exact impact of a short sale or foreclosure on your credit score cannot be predicted with certainty.
