A foreclosure and a short sale have massive negative hits on your credit score. A foreclosure is worse most of the time because you are not working with your bank whom you owe money to settle your debts. On the other hand, a short sale is a form of debt forgiveness. During a short sale, your bank agrees to forgive the difference between the sale of the property and the total mortgage that you own.
Sell Pittsburgh Home Fast Tip: Be aware you will probably have to pay taxes on your deficiency!
Be it with a short sale or foreclosure, once your credit is trashed it takes between three to five years just to get it back where it was. In some cases, your credit score will be permanently affected
How much will a foreclosure hurt my credit score?
According to FICO, if your credit score is 680, a foreclosure will drop your credit score on average by 85 to 105 points. If your credit score is excellent at 780, a foreclosure will drop your score by 140 to 160 points. In other words, the higher your credit score the more it will get smashed!
Here’s a brief summary of averages from Fair Isaac:
- 30 days late: 40 to 110 points
- 90 days late: 70 to 135 points
- Foreclosure, short sale or deed-in-lieu: 85 to 160
- Bankruptcy: 130 to 240
How long will a foreclosure stay on my credit report?
A foreclosure will be on your record for 7 years on average, plus 180 days from the last time the account was paid as agreed. The public record would have its own opening date (the date the foreclosure was filed at the courthouse) and would show for 7 years from the date of the disposition.
Sell Pittsburgh Home Fast Tip: Your credit score will gently improve over these seven years, but not fully until the foreclosure is off your record. Sometimes selling your house can be the best way to avoid this financial disaster.
If your property is foreclosed on, you can expect to pay much higher interest rates on all of your future conventional financing (between 1 and a half to 2%!) unless you want to pony up a sizable downpayment on your new property (more than 20% down).
When Will My Mortgage Company Start Reporting Late Payments?
The foreclosure process is not a joke. As soon as you are 30 days late with your mortgage payment, your mortgage holder will begin reporting to the credit bureaus. That is to say, before your foreclosure even begins you will start to get negative hits on your credit score. It is common for most banks to wait until you are 90 days behind in your payments to begin foreclosure proceedings in Pittsburgh, which often take two to three months to complete from start to finish.
Sell Pittsburgh Home Fast Tip: By the time your foreclosure is actually finalized, you will find your credit score is reflecting a drop of up to 200 points, reflecting six months of missed payments.
Many of our clients have found our services valuable to help them through this process; ensuring that their credit is not destroyed in foreclosure and helping them quickly sell their property for cash to move on with their lives in Pittsburgh. If you find yourself saying “need help avoiding foreclosure in Pittsburgh” and are interested in learning more about avoiding foreclosure and foreclosure help, please contact one of our specialists today at 412-404-0248 or fill out a form here.