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Foreclosure vs. Paid for Less Than Full Balance

Dear Experian,

Which has a more negative effect on my credit score, “Account Paid In Full For Less Than the Full Balance” or “Foreclosure”?


Dear ZPT,

A status of “account paid in full for less than full balance” or “settled” will likely have a substantially negative impact on your scores because it means that you did not repay the debt in full as agreed.

You may have heard the term “short sale” when discussing selling a home for less than is owed on the mortgage. The term “short sale” is used to describe negotiating settlement of the mortgage, which will be shown in your credit report as “settled” or “account paid in full for less than the full balance.”

According to VantageScore LLC, a mortgage loan settled through a short sale typically results in a change of 120 to 130 points in the VantageScore credit score. A foreclosure generally causes a decline of 130 to 140 points.

It’s impossible to say exactly how large the impact will be because scores take into account the individual’s overall credit history.

Thanks for asking.
– The “Ask Experian” team