How Short Sales Will Affect Your Credit
By Mike Wayman
The short sale of a home or property usually occurs when the owner either owes more in loans than the property is worth, or the property value falls drastically for some reason, causing the owner to sell the property before it becomes further devalued. Either way, a short sale can affect the owner’s credit.
First, if the short sale is due to foreclosure and the property is sold for less than the loans owed on it, the owner will be responsible for the difference. If they cannot pay the difference, the bank can then sue for the difference, resulting in a judgment against the former owner and thus a negative credit rating will result. However, if the bank chooses not to sue, but instead takes the loss as a tax write-off, then the former owner owes nothing further and is not sanctioned in any way, thus there is no negative reflection on their credit report resulting from the short sale.
Sometimes a property owner will sell the property and take out a new, smaller loan to pay the difference of what is still owed after the short sale, which can actually help their credit rating by showing no negative report due to foreclosure and also the securing of a new loan with timely payments being made. In a roundabout way, this can boost credit scores by showing the activity of a new loan being paid correctly, which is always a benefit to one’s credit rating.
How Will A Foreclosure Affect Your Credit?
By Mike Wayman
In today’s economy it is not surprising that many people are dealing with foreclosures. In fact, there are many tv specials that report the substantial amount of foreclosures that are prevalent today. If you have foreclosed on a loan or are at risk or foreclosure, your credit score is definitely going to be effected.
A credit score or FICO score indicates your ability to pay your bills. Anything can change this score, and a failure to make a loan payment for 30 to 90 days will definitely result in a decrease of your score. Additionally, every time you further default on payments, your score is further affected – it is like a rippling effect.
Most people who have foreclosure on their credit scores are denied credit for up to 7 years. If they are lucky enough to get credit to pay for something, it will most likely be at an extremely high interest rate. However, some people say that this cannot be proven for sure. The researchers do suggest, however, that your credit score will be lowered by 100 to 150 from a foreclosure.
Regardless, your credit score is a valuable asset. If you have not foreclosed yet, do whatever possible to avoid it. And, if you already have a foreclosure on your record make sure that you are doing everything possible now to establish a positive credit history.
