Does a short sale hurt your credit? Selling a home can be a complex and emotional process, especially when faced with the prospect of a short sale. Understanding the credit-related consequences of a short sale can help you make an informed decision about the best path forward for your unique circumstances.

In this blog post, Ocala real estate expert Scott Coldwell and the team at Your Home Sold Guaranteed Realty - Coldwell Real Estate Services discuss if short sales hurt your credit and the potential implications for your financial future.

Key Takeaways:

• A short sale can lower your credit score by 100 to 150 points or more.
• While damaging, a short sale is generally viewed slightly less negatively than a foreclosure by lenders.
• Continuing to make payments until the short sale closes can help minimize the impact on your credit.

Does a Short Sale Hurt Your Credit?

Yes, short sales do hurt your credit. Top Ocala realtor Scott Coldwell explains,

“A short sale typically lowers your credit score by 100 to 150 points or more, depending on your starting score.”

This significant drop occurs because short sales are reported negatively to credit bureaus. Short sales usually appear on your credit history as “settled for less than full balance” or “not paid as agreed.” These derogatory marks can remain on your credit report for up to seven years from the date of the first missed mortgage payment.

Any late or missed mortgage payments leading up to the short sale will also negatively impact your credit.

There’s no way to completely avoid credit damage from a short sale. However, continuing to make payments until the sale closes can help minimize the impact.

Short Sales vs. Foreclosures

While short sales have a substantial negative effect on your credit, lenders generally view them less unfavorably than foreclosures. Coldwell notes,

“Many lenders view short sales more favorably than foreclosures because it shows the homeowner took proactive steps to resolve the situation.”

This distinction can make a significant difference when applying for future loans or credit.

Timeline for Credit Recovery

The good news is that the credit damage from a short sale is not permanent. Your credit score may start to rebound within 2 to 3 years after a short sale if you practice good credit habits. This timeline is also generally faster than the credit recovery process following a foreclosure, which can take 5 to 7 years.

In addition, you may be able to qualify for a new mortgage 2 to 4 years after a short sale, compared to 5 to 7 years after a foreclosure. This can be a significant advantage if you’re looking to rebuild your financial standing and potentially purchase another home in the future.

Minimizing the Impact of a Short Sale

While a short sale does hurt your credit, there are steps you can take to help minimize the damage:

• Continue making mortgage payments until the short sale is finalized.
• Work closely with your realtor and lender to ensure the short sale process is handled properly.
• Practice good credit habits, such as paying bills on time and keeping credit card balances low.
• Consider speaking with a financial advisor to develop a plan for rebuilding your credit.

Remember that while a short sale will impact your credit score, it may still be a better option than a foreclosure. To decide what’s best for you, it’s crucial to work with experienced professionals who can guide you through the process and help you evaluate your specific situation.

Sell Your House Fast with the Best Realtor in Ocala, Scott Coldwell

If you’re looking for the best realtor in Ocala, look no further than Scott Coldwell and our team at Your Home Sold Guaranteed Realty - Coldwell Real Estate Services. With 20 years of experience in the industry, we are deeply familiar with the local housing market in Ocala and have what it takes to sell your house fast. 

Our track record of success is proven through our data– on average, we sell homes 48% faster and for 2.4% more money than our competitors. 

Plus, with our seller guarantees such as our Guaranteed Sale Program, you can ensure a risk-free home-selling experience. Contact us today at 352-290-3512, send a message to [javascript protected email address], or use the form on this page to learn more about working with our team.

To Discuss Your Home Sale or Purchase, Call or Text Today and Start Packing!