According to National Mortgage e-Alert, Short Sales, Foreclosures or Deed in lieu, does not make any difference. FICO treats them the same way for purposes of reducing the credit score. However, the higher your starting score, the more dramatic the effect. If the initial credit score is about 780, the drop would be 90 – 110 points with a single missed payment on the mortgage. The foreclosure or short sale would cause the drop to be 140 – 160 points. There’s no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure. While a score may begin to improve sooner, it could take up to 7 – 10 years to fully recover, assuming all other obligations are paid as agreed.
If you would like to see the FICO charts on three different scores ranging from 680, 720 and 780 and the effect from 30 days late to foreclosure and the amount of time it takes for the score to recover which can be as high as 7 – 10 years under certain circumstances go to http://tinyurl.com/3eze2a5.
