Foreclosure, short sale and deed in lieu of foreclosure can adversely affect your credit. It will create problems for you if you apply for credit in the future.
Foreclosure
Foreclosure is very serious. It hurts your credit score and makes it harder to buy a house or rent in the future. A foreclosure can result in a loss of up to 300 points on your FICO score. So if your FICO score was 700, it could go down to 400. You will most likely end up waiting for up to 36 months before any lender will offer you an interest rate that would make some sense. A foreclosure will remain on your credit report for seven years.
Deed in Lieu of Foreclosure
If you use a deed in lieu of foreclosure to give your home back to the lender it will affect your credit just like a foreclosure. Like foreclosure, a deed in lieu of foreclosure can remain on your credit report for seven years and will reduce your FICO score by up to 300 points. When compared to foreclosure the overall damage to your credit is lower. When you give back your home to the lender it means that you recognized that you cannot keep your home and you took responsibility. From a lender’s point of view, this is a good sign. In case of a foreclosure, the number of defaults appearing on your credit report will be more whereas in a deed in lieu of foreclosure the number of defaults appearing will be less. Compared to foreclosure, if you have given a deed in lieu of foreclosure it will easier to get credit in the future on favorable terms.
Short Sale
Short sale is a way of selling the home. The lender will accept less than what is owed as payment if they are convinced that it is in their best interest to do so. In a short sale, you sell your home at market value and turn over the sales proceeds to the lender who then cancels your mortgage obligation. The methods of reporting short sale to the credit bureaus vary from lender to lender. Based on this it can decrease your credit score from 50 to 300 points. You may have to wait for 18 months before you can get credit on favorable terms.
Getting Legal Help
Foreclosure, deed in lieu of foreclosure and short sale all have an adverse affect on your credit. Talk to an experienced foreclosure attorney. The attorney can assist you to determine your best option.
