1. How they affect your Credit Score:
a) Both Short Sales and Foreclosures can affect your credit score. This can affect your ability to obtain an apartment, a car, credit cards, etc. However, a Short Sale can lower your credit generally speaking 50-125 points, whereas, a Foreclosure can impact your score by upwards of 300 points.
b) Foreclosure remains of credit report for about 7 years and must always be disclosed on any future mortgage applications. A Short Sale, however, only affects your credit for 18-24 months , typically no more, allowing you to purchase a new home soon.
c) With foreclosure, seller has to answer “YES” in future consumer loan apps as to whether or not they had a foreclosure. Saying “YES” leads to further analysis of the credit app, and may cause a higher rate
d) A foreclosure is the one credit report item that is impossible to “repair”.
e) Employers typically run credit reports prior to hiring a new employee and a foreclosure is one of the top few items that will cause a prospective employee to NOT be hired.
2. How they affect your relationship with the Government:
a) Military and civilian government security clearances are affected by your credit score and thus a foreclosure can cause your clearance to be at risk.
b) When your home goes into Foreclosure, you lose the possibility of receiving any government incentives. With short Sales you could receive several incentives such as $3,000 for moving expenses.
3. How they can impact how you deal with the Bank:
a) When you have a Foreclosure, your ability to negotiate regarding a deficiency judgment is eliminated. With a Short Sale you can actually structure into your agreement the ability to request for a dismissal of an deficiency judgment.
b) When you do all you can to satisfy a debt it makes the bank look at your actions in a different light, versus, just walking away from your debt. Not only does this help your relationship with the bank it is THE RIGHT THING TO DO! Plus, you will sleep better at night knowing you did the right thing.
Here is a helpful bit of information- There is ALWAYS time to stop a foreclosure even if it is the last day. Although it’s not guaranteed, a lot of people in that position feel like they are out of time. A short Sale expert can help you halt the foreclosure process with as little as a simple phone call. Most of the time more formal documentation is required.