How long does it take for a short sale to come off your credit?

Because both short selling and foreclosures fall into this general category, most lenders don't distinguish between the two and both remain on their credit reports for seven years. Short sales, such as foreclosures, can stay on your credit report for up to seven years. The positive side of short selling is that your score is likely to start improving more quickly, usually in about two years. However, there are things you can do to speed up the process.

Often, a short sale is a way for a struggling homeowner to avoid foreclosure, which can have more serious financial implications. Both a foreclosure and a short sale can damage your credit, but the latter may be less damaging. Still, if you're wondering how long a short sale stays on your credit report, the answer is seven years, which could affect your ability to get a loan in the future. If you're thinking of short selling your home or foreclosure, here's how much your credit rating could decrease, how long a foreclosure or short sale will remain on your credit report, and what you can do to reduce damage.

A short sale can stay on your credit report for up to 7 years, as can most negative ratings, such as foreclosures, foreclosures, cancellations and bankruptcies (although sometimes they can stay for 10 years). If the short sale was preceded by one or more late payments, the seven-year period begins with the date of the first delinquency that led to the short sale. How lenders declare the short sale can also have a significant impact on the damage to your credit rating. Kahan points out that a short sale can lower your credit rating by 50 to 200 points, which can put a lot of loans out of reach.

Lenders will declare the short sale to the three major credit bureaus as a cancellation, agreement, deed rather than foreclosure, or a loan paid off for less than the amount due. Keep in mind that just because you can apply for a mortgage soon after a short sale doesn't necessarily mean you should. Because you're required to repay your mortgage in full, you and your lender have to agree to the short sale before it can continue, says Suzanne Hollander, a lawyer and real estate professor at Florida International University in Miami. In the end, short selling almost always hurts your credit, but causes less damage than foreclosures or bankruptcies.

Late mortgage payments could have a double impact on your credit rating and affect it long before short selling or foreclosure occurs. You'll need to contact your lender or mortgage servicer directly to find out if a short sale is possible and the associated requirements. Credit rating aside, a short sale can also be a better option than foreclosure, since you won't have to wait that long to qualify for an FHA loan if you want to buy another home. However, as a last-ditch attempt, you can send a goodwill letter template asking your mortgage lender to identify with your situation and to remove short selling from your report as an act of good will.

Overall, the effect of a short sale on your credit score is comparable to the impact that a foreclosure has on your score. The short sale can damage your credit rating as long as it stays on your report, but the effect will lessen over time. .