The Bottom Line is: Foreclosure will hurt your credit. However, there are different severity levels and ways to reduce its effects:
The best way, as shown by the chart below, is to do a short sale. Extensive research has been done concerning credit implications when a homeowner is in a default situation. Those findings are listed below:
THE AFFECTS OF FORECLOSURE-RELATED ACTIVITY ON A CREDIT REPORT
| One month behind: | 12-15 point reduction | |
| Two months behind: | Repeat reduction of above | |
| Three months behind: | Repeat reduction of above | |
| …add these figures to below | ||
| Foreclosure with Bankruptcy | Extensive point reduction | 7-9 year reporting |
| Foreclosure Auction | 290-320 point reduction | 5-7 year reporting |
| Deed-in-lieu | 150-200 point reduction | |
| Short Sale | 70-90 point reduction |
* These numbers are only a general guideline and sample picture of the realistic outcomes. These numbers will vary depending on your credit score before default as well as other credit factors that apply to you individually. We do not testify the accuracy of these numbers and reporting for each individual set of circumstances.
