I am so sick of seeing articles written on this subject by people who have clearly done absolutely ZERO case-study on this subject. They just simply regurgitate what they read on MyFico or some other Credit Bureau website. Today’s case in point is this article.
The answer is very simple. The Short Sale is better for your credit score and your credit profile than a Foreclosure and here is why:
#1 – A Foreclosure is a Repossession and is reported as such. There is nothing worse than that except for a collection. Short Sale is an agreed settlement amount that the Creditor accepts to close out an account.
#2 – In either case, it’s the late payments on the mortgage that are really going to do the damage to your credit score. With a Short Sale, you can control how many of these there are and stop them more quickly than with a Foreclosure that doesn’t get settled until the Bank finally gets around to it.
FINAL ANSWER – Short Sale is much better for your Credit Profile and your Credit Score than a Foreclosure. Period. You can get more details from this video I create a while back that explains it visually as well…