What possible credit issues might I have with a short sale?

No two San Diego homeowners who short sell will experience the same effect on their credit scores.

After the short sale of your home, the consequences with regard to your credit rating are impossible to predict. If anyone tells you otherwise, they are wrong.

As much as we’d all like to make accurate predictions, credit reporting cannot be generalized, and the formulas used by Fair Isaac to create FICO scores are a closely held secret.

We do know that FICO scores are a mathematical assessment of your credit performance over time, combined with a snapshot of your credit use on that date. No two people would have the same snapshot, so each element of a short sale will have a different impact, depending upon the other facts contained in your credit report.

What is clear…

However, after more than 25 years’ experience in working with and observing credit scoring, it looks clear that a short sale and a foreclosure do not compare to each other. A Deed in Lieu or a Foreclosure will, in most cases, always end up with a very harsh result.

When it comes to short sale consequences, the seller in default is more likely to experience a lower credit rating than the seller who succeeds without missing any payments. However, the seller who is not missing payments might not be able to argue that there is any hardship and thus may not be allowed to short sale.

Regardless of whether the homeowner was in default or not, short sale consequences are always less severe than the consequences of a foreclosure.

A recent San Diego Homeowner pointed out that one of the great bonuses to using us for San Diego short sales is that we use the services of one of the nation’s premier credit repair firms. These credit specialists offer pre-short sale counseling to help you avoid mistakes that will further damage your credit.

A credit trap to avoid:

One of the largest single mistakes made by homeowners in distress is waiting to act and amassing unsecured debt in order to keep making payments on the house.

For instance: We had a Rancho Santa Fe resident call us to sell his home as a Short Sale. He had been trying for more than a year to obtain a loan modification and had now been notified that ASC had rejected his request. In the meantime, he had used up his credit limit on three credit cards. He was deeply in debt.

We were able to short sale the house and zero out any liability from his mortgage debt, but he is still faced with hefty balances and payments on three credit cards. Using the cards to their limit harmed his credit scores. If he is unable or unwilling to keep up with the payments, his scores will suffer even more.

The bottom line: If you think you are headed into housing trouble, act early. Save your resources.

The effect on your credit is just one of the many questions and concerns you may have as you contemplate the short sale of your San Diego home. We do have answers, so call 619-929-1413 or write td@tomdunlap.com.

We’ll be glad to discuss your situation, explain the short sale process, and answer your questions.

Please note that the information provided on this San Diego short sale page is generic, academic information used for general information purposes and may not be construed as or relied upon as a promise for a specific outcome.

This site provides information about real estate, law, income taxes and credit scores as relates to borrowers in distress, short sales and similar situations. The site is designed to help users safely cope with their own needs. Information is not the same as advice — the application of law or regulations to an individual’s specific circumstances. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a lawyer, tax adviser or other specialist if you want professional assurance that our information, and your interpretation of it, is appropriate to your particular situation. The models in photographs accompanying the testimonials on this website are used for illustrative purposes and are not a personal endorsement.