Today our question of the week has to do with credit ramifications after a short sale, foreclosure, loan modification or any distressed financial situations. The first thing to do is take into consideration the long term and short term effects of each of these different types of situations. In a foreclosure, the long term effects of foreclosure have to do with how soon you can buy a house again or have a business loan. Under a foreclosure, there are some programs where you can buy a home again after three years or so, but for the majority of people they’re looking at five to seven years until they can purchase a home again. On the short sale side of things, most homeowners are able to buy a home again within two years; this is the timeline that we put our clients on. To sum up, for homeowners going through foreclosure, they’re looking at anywhere from 3-7 years until they can purchase a home again and for those completing a short 2-3 years.
But what about their credit score? With this, a foreclosure and short sale are going to be pretty much the same. Your credit score reacts quickly to missed payments and things like that; it drops quickly. The good news is that it also reacts quickly to making payments on time and started to recuperate your credit. Basically, the national averages for foreclosure are about 100-150 point drop to your credit score and about 80-120 point drop for a short sale; this depends on how many missed payments you have as well as a number of other factors. Generally a foreclosure takes longer and that’s what it has a greater impact on your credit score. The important thing to know is that even after you gone through these situations credit agencies are about 70% inaccurate after you’ve been through a foreclosure or a short sale. It’s important you pull your credit report and make sure everything is reporting correctly.
If you have any questions about your credit, how you’re going to affected or how you can repair it please contact us via the website or our phone number listed above.