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Effect of Foreclosure, Short Sale, and Bankruptcy on Your Credit Score

Written by Nickel - 17 Comments

Have you ever wondered what kind of impact a foreclosure, short sale, or bankruptcy would have on your credit score? Well, wonder no more…

According to a recent report from VantageScore Solutions, which is a credit scoring company created by the “big three” (Equifax, Experian, and TransUnion), here’s what you can expect:

  • Short sale = 120-130 points
  • Foreclosure = 140-150 points
  • Bankruptcy = 355-365 points

Apparently loan modifications, where late payments and penalties are rolled into the mortgage balance, can actually have a small beneficial impact on your credit score.

Note that your VantageScore isn’t the same as your FICO credit score. VantageScores range from 501 (subprime) to 950 (superprime), whereas FICO scores range from 300-850.

Despite these differences, the numbers above can give you an idea of the relative impact of the different scenarios. Moreover, your VantageScore is being used by an increased number of lenders, particularly large mortgage lenders.

If you’re curious about your “real” FICO credit score, you can take a free peek at it by signing up for a free trial with MyFICO.

Source: Baltimore Sun via Clark Howard

Published on November 20th, 2009
Modified on December 20th, 2012 - 17 Comments
Filed under: Credit Cards, Mortgages

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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17 Responses to “Effect of Foreclosure, Short Sale, and Bankruptcy on Your Credit Score”

  1. 1
    Ron Says:

    Why do you think those large mortgage lenders are switching over to Vantage? Does FICO information cost them more?

  2. 2
    Christina Says:

    While foreclosures wreck less havoc on the score than a bankruptcy (according to your post above) . . . going through a foreclosure has a much larger negative affect on your credit for future home ownership than a bankruptcy does.

    One can purchase a home as soon as 30 days after a bankruptcy. After a foreclosure? It’s a minimum of 4 years and lately, I’m seeing underwriting push it to 5 and 6 years, regardless of how great your credit may be otherwise . . .

  3. 3
    nickel Says:

    Ron: Good question, and I have no idea as to the answer. It could be cost, it could be better perceived accuracy, or who knows what else.

  4. 4
    laura Says:

    I have a foreclosure on my credit from Jan 2007 and my FICO score is 690 to 720 depending on the company. Those scores above must not last very long.

  5. 5
    Valerie V. Says:

    Good information. A short sale vs. foreclosure involves more than just the credit score. According to today’s guidelines, one can purchase a home within 2 years of a short sale. After a foreclosure, however, a new home cannot be purchased in less than 7 years. It’s important to understand the differences and do a short sale if at all possible. Some lenders report lates on the mortgage and not the “short sale” which means a consumer could purchase a new home in 12 months or less. It’s worth it to consult with and use the services of a short sale expert who is experienced in negotiating short sale settlements with all the major banks. After all, the bank pays all the costs in a short sale.

  6. 6
    Mitch Says:

    Very good information here. It’s good to see the actual impact, although I’ve been writing for months that I think credit scores are pretty worthless in this economy, good or bad. The statistic that came out last week saying that less than 4% of people who have gone for modifications of their home loans have been permanently approved, no matter their credit score, pretty much points that out.

  7. 7
    Dan Says:

    Those are interesting figures. Im inclined to agree with Christina that foreclosures would have a larger negative impact overall than bankruptcy, especially when you consider the months running up to the foreclosure w/ missed/short mortgage payments.

  8. 8
    Kevin@OutOfYourRut Says:

    Have to agree with Mitch (6) here. While I don’t agree that credit scores are worthless, I do think most people make more of them than they should, especially in this economy, as Mitch points out.

    If it’s a choice between feeding your kids, paying your electric bill, or paying a credit card, the credit card has to lose. If you’ve lost your job and can’t pay your mortgage, foreclosure may be the only out, and the affect on your credit score should be the least of your concerns. If bankruptcy is the only way to get out from under, your credit score will have to wait until a time in the future when you can do something about it.

    Life is more important than a score, even if tracking it makes for good entertainment.

  9. 9
    Christina Says:

    If one pays cash rather than accruing debt, one is not controlled by a score and doesn’t need to worry about it.

    The miniscule discount on insurance one receives for having a GOOD score vs. NO score (not talking about a low score here) is not worth having debt.

    And the whole debate of employers checking credit is different than requiring high scores (and P.S. a “no” score passes high level security clearances).

  10. 10
    laura Says:

    Christina, I absolutely 100% agree.

  11. 11
    Ericka Says:

    I just did a short sale. I paid $245,000 for the house and we sold it for $238,000. The second mortgage is coming after me for 49,221.00. I obviusly can’t afford to pay it. I have been told that the bank is going to sue me. What can I do?

  12. 12
    Jim Says:

    The impact foreclosure has on your future ability to purchase real estate is the real monster. If you can swing it, short sale is the best option in my opinion – less of a credit score hit than a bankruptcy, and you can qualify for a home loan much, much more quickly

  13. 13
    Josephine Says:

    I tried short sale, the bank said it came too late.
    to save the hourse from foreclosure, should I file
    chapter 13? or is it better to let it foreclosure?
    I need in put on this matter. thank you all.

  14. 14
    Patrick Says:

    I am in the same situation. I can’t figure out what to do. I’m in a fixed interest rate on a 30 year loan, but it’s interest only for the first 10 years. I bought the house for $335K but now it’s only worth $175K. Basically I would be tied to this house for the rest of my life, which is not what I had planned on. Is it better to do a Chapter 13 to get rid of the second mortgage (78k) and keep the house hoping that some day it’s gain it’s value? or should I just try a short sale and buy back into the market in 2 years knowing that prices will be low for quite a while?

  15. 15
    ILLUSURY Says:

    First of all anyone knows WHY we have NEW YEAR and WHO created it ? SUPERRIOR HUMANS WHO HAD LOTS OF HUMAN SLAVES not one race all races White / Browns / Yellow / Blacks, because we are all equals we all have same machine FACE HEART AND BRAIN only the colors of skin is different. BANKSTER created the new year to count there stocks and money and celebrated how much they made that year they always made money no matter what were the conditions that iis why Christainity and Islam does not allow INTEREST ( greek philospor said
    DEBT IS THE SLAVERY OF THE FREE PEOPLE ) CREDIT IS EVIL, MAGIC AND ILLUSION, FOOLS YOU WHAT YOU DONT HAVE AND TRICKS YOU GO HEAD BUY IT YOU CAN PAY IT LATER MY DEAR FRIENDS STOP THESE SCORE CARDS. THESE SCORING ORGANIZATIONS BELONGS TO SAME BANKS IN OLD DAYS THEY USED TO BUY HUMAN LITERALLY. IN NEW MODERN WORLD TODAY THEY ARE DOING THE SAMETHING BUT THEY ARE USING THE MAGIC/ILLUSION. YOU ARE ACTUALLY A SLAVE. EFFECT OF THIS IS DESTRUCTION, DIVORCE,CHILDREN WITHOUT TWO PARENTS, MAN BECOMES IMPOTENT ?? THIS IS FACT THINK FOR YOURSELF I WILL GUARANTEE YOU 200% WITH THIS MESS COUPLE DO NOT MAKE LOVE ONLY BEST ENTERTAIMENTS IN THIS WORLD FOR MALE AND FEMALE. STAY AWAY FROM THE DEVIL DO NOT WORRY ABOUT THE SCORE THOSE ARE THE ONLE NUMBERS GO TAKE CARE OF YOUR WIFE AND KIDS EAT WELL AND ENJOY THIS BEAUTIFUL PLANET THIS IS FOR EVERYONE NOT FOR THAT ONE EYED ANTI CHRIST WHO IS LOOKING AT US AT ALL THE TIME.

  16. 16
    Shakespear/shylock Says:

    Thank God we live in America not in DUBAI if you cannot pay your debt there is a reason ? you are not crook or cheater maybe because of lost of jobs lost of business income you want to be a good and moral and decent person to pay your debt but these BANKSTER had put so much FEAR in you .You think you will be destroyed it is not true Believe me they will not work with unless you play POCKER with them do not pay them… UNLESS they reduce the price of the house in TODAYS market They are BROKE they are being like SHAKESPEARS SHYLOCK I WILL TAKE A POUND OF FLASH FROM YOUR BODY i am glad they can not take your KIDS and WIFE. that will be a reveloution. DO NOT FEAR. FEAR IS EVIL. HOPE IS FOREVER ( 1058- 1120 GAZAALI FEAR & HOPE ) READ IT YOU WILL BE STRONG

  17. 17
    What Is Short Sale Says:

    Hi there, this weekend is fastidious designed for me, since this moment i am reading
    this great informative article here at my residence.

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