Short Sale, Foreclosure & Your Credit Score

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Mark Cappel

UpdatedApr 6, 2011

2 min read

Key Takeaways:

The higher starting score, the longer it takes for the score to recover.
There is little difference between a short sale and a foreclosure on a FICO score.
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The Higher a Consumer's Credit Score, the Farther it Will Fall With a Short Sale, Bankruptcy, or Foreclosure.

A common question among Bills.com readers is how a short sale, foreclosure, or bankruptcy impacts a consumer’s credit score. Another common question is how long it takes to recover from one of these devastating events. The maker of the FICO credit score, Fair Isaac & Co., released two tables that show how a short sale, foreclosure, and bankruptcy degrade the score of a consumer starting with a low, medium, and high score. In general, the old adage, "The higher they climb, the farther they fall," holds true for credit scores.

Here are Fair Isaac & Co.’s tables:

Harm to FICO Score

	Consumer A	Consumer B	Consumer C
Starting FICO score	~680	~720	~780
FICO score after these events:
30 days late on mortgage	600-620	630-650	670-690
90 days late on mortgage	600-620	610-630	650-670
Short sale / deed-in-lieu / settlement (no deficiency balance)	610-630	605-625	655-675
Short sale (with deficiency balance)	575-595	570-590	620-640
Foreclosure	575-595	570-590	620-640
Bankruptcy	530-550	525-545	540-560

Source: Fair Isaac & Co.

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Time to Full Recovery

	Consumer A	Consumer B	Consumer C
Starting FICO score	~680	~720	~780
FICO score time to recovery after these events:
30 days late on mortgage	~9 months	~2.5 years	~3 years
90 days late on mortgage	~9 months	~3 years	~7 years
Short sale / deed-in-lieu / settlement (no deficiency balance)	~3 years	~7 years	~7 years
Short sale (with deficiency balance)	~3 years	~7 years	~7 years
Foreclosure	~3 years	~7 years	~7 years
Bankruptcy	~5 years	~7-10 years	~7-10 years

Source: Fair Isaac & Co.

Fair Isaac notes the time to recovery estimation assumes the consumer does not open any new accounts, have any other delinquencies, and all three hypothetical consumers started with the same debt balance.

Also, Fair Isaac points out that in the second table, the time to recovery is for a full recovery, and that a partial or even a half-way recovery is still significant.

Each state legislature created unique foreclosure and anti-deficiency laws for each state. Follow the links just mentioned to learn the foreclosure rules relevant to you.