“Compromise sale” of home will hurt credit

Dear Experian,

I am active duty military and anticipating a permanent change of station this year. I am considering doing a VA compromise sale on my home in Tucson, as it is underwater. I am current on the payments and am wondering how much a VA comp sale will hurt my credit?



Dear DRL,

The term “short sale” or “compromise sale” is used to describe an agreement between you and your lender to sell the house for less than is owed on the mortgage. Neither term appears in a credit report.

Instead, the mortgage account may be reported as “settled,” or “settled for less than full balance.” It will also show any history of missed payments. Even if you remain current leading up to the sale, any account not shown as” paid in full as originally agreed” is considered negative. A mortgage debt not paid in full can have a substantial negative impact on credit scores.

Time is the key for rehabilitating your credit history. If you determine that a short sale is the best option for you, make sure all of your other debt payments are always made on time, and reduce any debts you have as much as possible. Continue to use your credit cards, keeping your balances low and paying in full each month. The positive, current activity can help offset the negative history for your mortgage, and in time your credit history will recover.

Thanks for asking.

- The “Ask Experian” team

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