How Does a Short Sale Affect a Credit Report?

It is a very hot topic these days, how a short sale affects one’s credit report.  In a related article, How Does a Short Sale Affect My Credit Score, I described the affect of a short sale on specifically the credit score.  In this article, I am going to give you an inside look at what it does to your credit report. 

After a short sale transaction is complete,  the lender is going to report to the three credit bureaus (Equifax, TransUnion and Experion) that a short sale was conducted on the loan, as opposed to a full payoff.  Although lenders are subject to change their policies on a moment’s notice, we have seen Countrywide report, “settled as agreed”, Litton Loan Servicing report “account settled”,  HFC Beneficial report “settlement in full” and HSBC report, “Account legally paid in full for less than the full balance”.  This terminology is very similar to what credit card companies report when a borrower settles an old collection for a percentage of the total amount owed. 

 

In most cases, the short sale approval letter will specify the exact wording the lender is going to report to the bureaus.  In isolated cases, you may find where the short sale approval letter does not specify how the short sale will be reported and in such cases, you should contact the department handling the short sale to determin how it is going to be handled.  Also, we have seen where some lenders fail to report a short sale to the credit bureaus, for who know what reason.  Maybe they forget?  And if the account is more than 120 days past due, many times it will automatically show up as a “foreclosure” on the credit report.  Therefore, it is imperative that you follow up with all three credit reporting bureaus a month or two after the short sale is complete to verify with all three credit bureaus that a “foreclosure” is not showing up.  In such cases, you may have to provide evidence to Equifax, TransUnion and Experion to prove that indeed the property was sold prior to a foreclosure.   I hope this helps you understand how a short sale affects a credit report.

ATTENTION HOMEOWNERS

• Need a short sale? Have one of our certified short sale specialists help you. SELL YOUR HOUSE NOW
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Comments

1. Nikki Jones says:

   April 19, 2010 at 1:48 pm

   This is a tremendous help to me. I am working with one of your students in Chicago, and decided to do a little research on the company before signing the paperwork. I am glad that your website offers tips and answers questions for homeowners that are going through the short sale process. It helps me relax a little knowing that you are here to educate.
2. Jenne says:

   July 18, 2011 at 8:49 am

   Hi, I am entering into a short sale agreement PFS FHA Program which forgives the deficiency balance. My question is: What is needed on the Short Sale Contract to ensure my credit report is not negatively effected? (ie., what words should I have my realtor include that would not negatively impact my score? I was told by a USDA underwriter, how they report it will impact whether I am immediately able to buy a home. Any help would be appreciated. Thank you in advance.
3. Anna says:

   July 30, 2011 at 8:35 pm

   Had a short sale. Property was sole with no residual balance, cash contribution and or note contribution. Did not put any notice on agreement. Said I would not be attacked. Also stipulation stated that the within case be dismissed without prejudice, the mortgagor having tendered sufficient monies to reinstate the mortgagors obligation. Now it is on my credit report what do I do.