Credit Advice

A mortgage “short sale” and your credit report


Have a question?

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.

Our policies
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.

Credit Advice

A mortgage “short sale” and your credit report

Dear Experian,

A mortgage lender advises that a mortgage “short sale” is reported to the credit agencies as “paid in full, but not the full amount.” How negatively would this status affect a credit score?


Dear ATL,

A short sale almost certainly will negatively impact credit scores because you are settling the mortgage debt for less than you agreed to pay originally. I say almost certainly because in rare cases a lender may report the debt as paid in full and forgive the remaining portion of the debt.

While it is possible that the lender would forgive any remaining balance, the words “short sale” will not appear on your credit report. Rather, the account status accurately should be reported as “settled,” which means paid but not in the full amount that you originally agreed to repay, just as your lender described.

Because it is a mortgage, the impact of settling the account will probably be significant. Just how significant, though, depends on your unique credit history.

A short sale would have less impact on the credit scores for a person with no other negative information than for a person who had late payments or collection accounts in their history. In either case, though, the damage to your creditworthiness, and therefore your credit scores, will be substantial.

If your objective is to get rid of the debt so you can quickly apply for new credit, a short sale probably won’t help. That should never be your goal, anyway.

Rather, you need to think about your long-term credit health. A short sale is one option that may help you get out from under debt you cannot manage. Once you are free of that unmanageable debt, you can begin to take steps to rehabilitate your credit history so that in months, or maybe even years, down the road you can obtain the credit you want and can manage in ways that work to your advantage.

Thanks for asking.

- The "Ask Experian" team

  • © 2016 Experian Information Solutions, Inc. All rights reserved.