Short Sales and Credit, how a short sale affects credit scores

short-sale-credit-mythsAs you can imagine one of the big questions people ask when people consider a short sale is: How will a short sale affect my credit score?  If one looks at Google searches you’ll see that tens of thousands of people a month are searching for phrases like how does a short sale affect credit, short sale and credit, and credit impact of short sale. That tells us we need to help provide an answer to the short sale and credit question.

First we need to say we are not credit counselors, financial guys or attorneys. So please do not take our thoughts as professional advice. At the end of this article we’ll give you links to professional sources who may be able to help with more information and advice.

Let’s start with some of the myths we hear and our thoughts.

You have to stop making your payments for several months before you can qualify for a short sale. Wrong!  We’ve seen people successfully complete a short sale without ever missing a payment and even more by only missing one payment and keeping the credit hit down to a 30 day late.

Short sales have the same impact on credit scores as a foreclosure. This depends on how many months behind you are on your mortgage payments and how your lender records your short sale with the credit reporting agencies. We are told by credit specialists that many short sales are not reported in a manner than has a huge effect on credit scores. In general, we are told that short sales, when professionally managed, have far less impact on credit scores than a foreclosure.

Short sales will reduce my credit score by 200 points.  There is no hard number we’ve seen on credit score numbers after a short sale. In many cases credit hits happen during a short sale because of late mortgage payments and other recurring debt payments that are not paid on time.  How a short sale will affect your credit score will be based on many factors besides how the lender reports the actual short sale. This is one of the reasons we feel people benefit by working with a professional credit specialist.

Short sales are better than foreclosures on credit scores.  Rather than answer this one ourselves we turn to the folks at Here is what they have to say: The perception that a short sale will always have less impact on a credit score compared to a foreclosure is simply a credit score myth.  Bottom line, the score considers both items to be negative, high-risk behaviors, so both options will have a negative impact on the score. The negative impact on a credit score appears more severe if a foreclosure or short sale is reported on a credit report that has little or no history of missed payments and/or derogatory information, and has low balances on active credit accounts.  In these scenarios, the number of points lost can be 150 or greater. The impact may be less noticeable if there are any indications of high-risk behavior (missed payments, etc.) already being reported in the credit report. This is because the negative history is already impacting the credit score which will be lower as a result, reflecting that higher risk behavior.

We hope this information about short sales and credit scores has been helpful. If you are considering a short sale in downtown, north central or greater Phoenix AZ, we are here to help answer your questions or point you in the direction of someone who can.

In the case of credit scores and short sales we have heard good things about Mick Bernard at Credit Strategies. We met him through the short sale mastermind group we belong. Many in the group like his thinking.  As is always the case when considering a short sale… seek professional legal, tax and real estate advice before you make a decision. Information first, action second is our motto.

Best to you and let us know if we can be of further help.

The Urban Team
7600 N. 16th Street, Suite 100
Phoenix, AZ 85020
602-234-5777 (voice)
602-486-4839 (text)

helping people with short sales and real estate in downtown, north central and greater Phoenix Arizona.

See our short sale specific site:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.