Selling Reno And Sparks Real Estate Blog


What Happens To My Credit Score if I Foreclose or Short Sale My Reno Nevada Home?

What happens to my credit score if I Foreclose or Short Sale my Reno, Nevada home? Whether you live in Reno, Nevada or Sparks, Nevada ~ and in most states ~ the result of a foreclosure or short sale will have the same affect on your credit report.

Short Sale VS Foreclosure

The first thing you should do prior to making any kind of decision regarding your financial obligations,  is to discuss your options with your accountant and/or your lawyer. Only then, after you have discussed your situation with them,  should you start to consider a foreclosure or short sale on your home.

What happens to my credit if I foreclose on my property?

A foreclosure on your credit report will pull down your overall credit score by a minimum of 50 (most likely a minimum of 100) to a maximum of 250 points. This range depends primarily on your initial credit score. One of the worst consequences of having a foreclosure on your credit report is that it will remain there for at least 7 years and it will remain a part of public record for life.

Why does my credit score matter?

Your credit score plays a huge role in your life, whether you like it or not. It can affect your ability to rent an apartment, get a cel phone contract, the cost of insurance premiums, interest rates on a home loan and sometimes it can determine if you are the right person for a job. Your credit score can either save you or cost you thousands of dollars over your lifetime.

Your credit score helps future landlords, phone companies, insurance companies, lenders and employers determine if  you are someone who pays their bills on time, if you take your financial obligations seriously, if you are dependable, and so on.

 After learning  the ways a foreclosure can affect your credit score and how it can affect the many areas of your life, you may choose to seek other options besides a foreclosure. Many home owners decide a short sale is a better choice for them.

What is a short sale?

A short sale occurs when you are unable to make your monthly mortgage payment and you ask your lender to accept less than what is owned on the mortgage. You must qualify with a acceptable hardship for most lenders to accept a short sale on your home.

A hardship can be defined as a change in the financial situation of the homeowner.
Examples of hardships:

Clip Art Overdue Bill

Income Reduction
Business Failure
Damage to Property
Death of Spouse
Job Loss
Military Service
Mortgage payments increase (adjustable interest rates)

What will happen to my credit score if I short sale my Reno home?

If you are delinquent on your mortgage payments, or any other payments, your credit score will be lowered. Your credit score could be reduced from a minimum of 50 points to 250 points if you short sale your home. The same reductions as a foreclosure. The range actually depends on your initial credit score, credit history and how many other items on your report that are not being paid.

So why is a short sale better than a foreclosure?Clip art House Question

As mentioned earlier, consult with your accountant and/or your attorney. Together you can hopefully  come to an agreement that will benefit you and your family. If you choose to short sale your home be sure all terms were agreeable between you and the bank, this is important because it will show creditors that you did all you could to avoid foreclosure on your home.

Some lenders view a short sale the same as a foreclosure while other lenders see that you did all you could to save your property and will be more likely to secure a loan for you in the future. A short sale will also show to future landlords, employers and possible insurance companies that you did all you could do to avoid loosing your home.

It doesn't matter if you live in Reno, Nevada or Sparks, Nevada, your credit score will take a huge hit if you foreclose or short sale your home. If you have decided that you prefer to try to short sale your home, I would be happy to meet with you to provide you with information that will help you in the short sale process. Contact me by email or call me, Terrie Leighton, REALTOR, at 775-846-5424.

Helpful links for short sales, foreclosures and credit score information:

How Credit Scores Affect Mortgage Rates
Fico ~ Your Credit Score ~ How To Improve
Equifax ~ Credit Scores and Monitoring
Hope Now ~ Are You Eligible?
Making Home Affordable
Credit Consumer Affairs
Nevada Legal Services

Looking to buy a Northern Nevada Bank Owned or a Short Sale property? Feel free to browse My Reno Home Search for complete and up to date listings in this area.

 What Happens To My Credit Score if I Foreclose or Short Sale My Reno Nevada Home?



Your Home. My Priority. Since 2003

Certified Distressed Property Expert (CDPE)
Certified Default Resolution Specialist (CDRS)
Short Sales & Foreclosure Resource ~ Certified (SFR)
NAR's Green Designation ~ Certified Green
Certifed Negotiation Expert (CNE)
Property Manager

Ferrari-Lund Real Estate

 Cell ~ 775.846.5424

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Comment balloon 8 commentsTerrie Leighton • March 14 2011 06:09PM


My understanding is that the worst part of the credit hit comes from missing payments during the short sale process.

Posted by Marcy Moyer, Probate, Trust, and Investment Specialist (eXp Realty of California Silicon Valley Probate, Trust, and Investment Sales) about 8 years ago

Marcy ~ As soon as you miss a payment your credit score will take a hit and it doesn't have to be simply your mortgage payment that will affect your credit score. You can actually complete a short sale while staying current on your bills as well.

Thank you for the comment.

Posted by Terrie Leighton, Reno Real Estate Agent ~ Selling Homes in Reno (Ferrari-Lund Real Estate ) about 8 years ago

Hi Terrie -- Wow, this is an excellent comparison between the two scenarios.  You write so well. Very easy to follow what is a complex subject.

Posted by Chris Olsen, Broker Owner Cleveland Ohio Real Estate (Olsen Ziegler Realty) about 8 years ago

I'm glad you mention the effects of both of these hardships on the future credit score and job hunting process.  I think some fail to realize that employers can sometimes view your credit score to make a hiring decision!

Posted by Wanda Thomas, Billings Montana Real Estate (Montana Homestead Brokers, Broker, CRS, GRI, SFR, RN) about 8 years ago

Chris ~ That is so nice of you to say! Thank you and I am glad the two scenarios were easy to follow and made sense.

Wanda ~ So true, employers do look at credit schools, perhaps not for all positions or all employers but some will and a lower credit score just might cost you a future job.

Posted by Terrie Leighton, Reno Real Estate Agent ~ Selling Homes in Reno (Ferrari-Lund Real Estate ) about 8 years ago

Great Info thanks

Posted by Robert Schmalz, Cal. Lic Broker (West Los Angeles Real Estate Group) about 8 years ago

Hi Terry,

Some local companies are cutting employees hours by 20%-25%. We have government layoffs and furloughs.  Between the cut in salary and benefits, Washoe County teachers will experience a 21% pay cut by the end of the year.  Many of these people will qualify for a HAFA short sale.  I know teachers who have qualified for this program who won’t even have to miss a mortgage payment. If they continue to make their other payments on time and keep their revolving balances low, their credit will be back to where it was in a very short time. 



Posted by Doug Kaller (Academy Mortgage, Reno, NV) about 8 years ago

Robert ~ you are welcome!

Doug ~ We are living in some really scary times with all of the current budget cuts aren't we? I hope the people who can no longer afford to make their monthly mortgage payments will consider a short sale prior to stopping payment. It could really save them a lot of money in the future, yet I am sure most people don't think about the impact your credit score will have on other areas as well.

Posted by Terrie Leighton, Reno Real Estate Agent ~ Selling Homes in Reno (Ferrari-Lund Real Estate ) about 8 years ago

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