Have you ever wondered what effect a short sale has on your credit score? Well, former FCN staff writer Matt Jabs now knows the answer.
Matt and his wife recently completed a short sale of their primary residence, selling their place for about $50k less than the purchase price, ultimately suffering a loss of ca. $25k in equity (including around $15k in improvements).
Going into the process, Matt’s credit score stood at 790. Afterwards? 705. Moreover, according to Matt, it was the missed mortgage payments that preceded the sale, and not the short sale itself, that reduced their credit score .
Note that most banks won’t work with you on a short sale unless you’re already behind on your mortgage payment.
Surprised? I am. I would have expected much more than an 85 point decrease. In fact, when I last wrote about the effect of housing woes on your credit score, the prevailing wisdom was that a short sale would reduce your credit score by 120-130 points. At 705, his credit score is still quite good given what they’ve been through.