Foreclosure versus short sale
Posted on 02. Apr, 2009 by tyler in Credit Cards, Credit Reports, Credit Scores
We found an informative and useful question and answer offered by Phil Tirone of 7 Steps to 720, on Foreclosure versus Short Sale. What’s obvious is that decisions on Foreclosure and Short Sale should be based on your personal financial health and that there isn’t a cookie cutter solution to everyone’s credit score problems.
An estimated 10 million Americans will be faced with the question: “Should I let my home go into Foreclosure, or do a Short Sale with my bank?” If the inevitable is coming, what is the best way to go? With millions of Americans facing a Foreclosure or a Short Sale in their very near future, many are asking the same questions:
Q: Should I let my property go into Foreclosure or do a Short Sale?
A: Depends on your situation.
Q: How can I recover my credit after this? How long will it take?
A: If you follow the right steps, you should have a 720 Credit Score 4-5
years sooner than waiting for it to fall off your credit.
Q: I heard I need to wait four years to get another home loan, is this true?
A: Not Necessarily. Some programs require two years.
Q: What will have a bigger impact on my credit score?
A: Most of the time, a Foreclosure will have a bigger impact on your
credit score. However, many consumers are unaware about Short Sales.
If a consumer is going to have a Foreclosure or Short Sale in their future, the most important item they need to focus on is their credit score. This one action item can save them thousands of dollars in future payments on their car, credit cards, and future homes.
After the Foreclosure or Short Sale, there are many things that consumers need to do. For example, re-establish credit from the beginning. Relying on their previous credit record will not work, even though other accounts had no late payments. Mistakenly, many Americans wipe their hands clean from credit once they have a Foreclosure; they feel that “credit got me into this mess, I need to stay away.” This is the worst approach for a healthy financial future.
By re-establishing credit the proper way, a consumer’s credit score can be considered “excellent” (above 720) 4-5 years sooner than having the Foreclosure or Short Sale fall off their credit report. After a Foreclosure or a Short Sale, a consumer should re-establish credit with three new credit cards and a car loan. It is best to apply for these credit cards all at the same time so that any impact to your credit report happens once and not on numerous occasions.
About Philip Tirone
Philip’s book, “7 Steps to a 720(R) Credit Score,” dispels the misconceptions around our credit scoring system and guides consumers who are struggling with Bankruptcy, Foreclosure, Short Sale, Divorce, and many other experiences that impact a person’s credit score.
Philip and his programs have been featured in the LA Times, the Wall Street Journal, and the San Francisco Chronicle, among others. Additionally, Philip has been a frequent guest lecturer at UCLA Anderson School of Business and Management.