Short Sale Specialist Discusses Credit Effect after a Short Sale

Hi there, I’m Shawn Polston with TucsonShortSaleNegotiator.com and Keller Williams Realty. We are one of Tucson’s leading short sale teams. I wanted to talk to you today about the question that often comes up and it’s really an interesting question. The answer is really vague and it’s about what impact a short sale will have on your credit. This is really a loaded question because the way credit scores are calculated is actually a closely guarded secret. There are a lot of variables that go into what the impact is going to be on your credit score. One of the things I can tell you is that we have had clients that we have done short sales for and they have been current on their payments. It actually worked out where we could get a short sale complete and they didn’t have to go behind on their payments. It actually goes to their credit report as a settled account. Meaning their lender and them worked out an agreement. It might have affected their score by 50 points. They’re paying all of their other credit and what they tell me is their credit score recovers rather quickly.

I’ve also had situations where borrowers have gone late or stopped paying their mortgage. The impact to the credit report in some cases hasn’t been too much and in some cases it has been a lot. One of the things there is it becomes a question of how much credit do you have. If you have 10 accounts and you have one account that you aren’t paying on, it won’t have as big of an impact as it would be if you have two accounts and you are late on one of them. All clients typically find out that their scores start to recover and increase after the short sale is complete.

The biggest myth I hear out there is that a short sale is going to have an enormous impact on your credit. In most cases, where that comes from is you have a borrower that has serious financial problems. Actually, it’s not just the mortgage that’s not being paid on the home. They may have two mortgages on the home that are not being paid; they also have several credit accounts that are not being paid. So really they are not paying any of their credit. When that’s the case, the credit score is going to have an enormous impact. people usually blame the short sale for the drop in credit and the short sale is a piece of that but really what it is, is that all their credit is not being paid is why it has an enormous impact on their credit.

The way credit scores are calculated is a closely guarded secret, and that’s how those industries make their money. Again, I’m Shawn Polston with TucsonShortSaleNegotiator.com, one of Tucson’s leading short sale teams and I’m here to help. So I hope you are having a great day. If you have any questions, feel free to pick up the phone and give us a call. Thanks and we look forward to speaking with you soon.