The credit consequences of a short sale and foreclosure vary and are not easily defined. The general consensus is that a short sale will show up on your credit report as a ”settlement”, “settlement for less than owed” or a "pre-foreclosure in redemption".
Often you will hear lenders will not consider allowing a short sale until a few payments have actually been missed so you may also have a few “lates” on your credit report. Neither of these marks are a good thing to have but it’s possible to get them off of your credit report within a few years or less.
Anyone suggesting they know an exact number it will affect your score is misleading you. Your credit score is set off of your personal credit events and the impact can be vastly different from one to another.
Fannie Mae states that a homeowner completing a short sale will be eligible within 2 years to purchase a home after the date of their sale. A consideration that should be kept in mind is that individual lenders following Fannie Mae guidelines may themselves enforce greater restrictions. But overall the amount of time to recover to purchase versus the time after a foreclosure will be shorter. A foreclosure on your credit report can take 7-10 years to remove and can cost your credit rating (FICO) an even bigger hit than the short sale.
Let us all be honest here, there is no good news when it comes to the impact on your credit. The only way to maintain your credit score is to stay current and make your mortgage payments. If that is just not possible then educate yourself properly to help soften the overall impact and length of time this stays as an influence to the health of your credit.
