Do you have a question about consumer credit? You may find an immediate answer by using the search engine. If you can't find what you're looking for, please fill out the form, being as specific as possible.
Please note: The Ask Experian team cannot respond to each question individually. However, if your question is of interest to a wide audience of consumers, the Experian team will include it in a future column.
The information contained in this column if for educational purposes only and is not legal advice. You should consult your own attorney or seek specific advice from a legal professional regarding your particular situation.
Please understand that Experian policies change over time. Column responses reflect Experian policy at the time of writing. While maintained for your information, archived responses may not reflect current Experian policy.
Topics addressed on October 29, 2008:
Impact of a short sale when your mortgage is not delinquent
With the declining value of property, sellers are caught in the position of having to short sale on properties for which the sellers are not delinquent. How does a short sale in which a person has never been delinquent report?
A “short sale” is an agreement between you and your lender to sell the property for less than you owe on the mortgage. In most cases, the mortgage is then reported as “settled.” The term means that the debt was not paid in full as originally agreed.
Anytime you fail to repay a debt in full it will negatively impact your credit report, even if the account was never late before the debt was settled through a short sale.
The account status should accurately show that it was never late, but that the debt was settled, not paid in full. That status will result in a negative impact on your credit scores. Just how negative depends on the rest of your credit history.
If you have no other problems, it will hurt your credit scores less than if you have other issues, such as late payments or high balances on other accounts. Still, because a mortgage is involved, it will definitely increase your risk position.
My advice to anyone caught in a mortgage they simply can’t afford and must escape with a short sale is to view it as a way to get out of an impossible situation and to accept that you likely won’t be able to apply for new credit until your credit history has some time to recover.
Of course, if you have just been at the brink of foreclosure, the last thing you should be seeking is more credit. It is time to focus on living within your means and saving a nest egg for the next unplanned financial challenge which is sure to come for all of us.
Thanks for asking.
- The "Ask Experian" team