fico_scoresFor Ann Arbor Home Sellers that are considering a foreclosure or a short sale, your F.I.C.O.(credit score) is probably way down on your list of things to worry about. Well, maybe you should be worried. How you handle the stressful last weeks/days of your mortgage can greatly impact your ability to obtain credit cards, buy/lease a vehicle, qualify for a rental property or various other types of borrowing, for the next 5 to 10 years.

If you simply can’t afford your home any longer you basically have 3 choices: Short Sale, Deed in Lieu of Foreclosure and Foreclosure. Now the general consensus is that taking the short sale route will ding your credit score the least and a foreclosure will totally devastate your rating. Well, that isn’t necessarily so, according to John Ulzeimer, President of Credit.com. Ulzeimer spent 7 years at Fair Issac Corp or FICO, building credit score models. Ulzeimer reports that ” the credit bureau  sees all those as equal.” “A short sale or Foreclosure  are all seen as a major delinquency in the eyes of FICO”, according to Ulzeimer.

So, how bad of a hit will your  score take if you do a short sale or foreclosure? According to loan originators from around the country, your FICO score could see a 70 to 300 point drop.  These amounts depend on many factors and the credit bureaus don’t share how it determines credit scores. But it is assumed that the variance in the drop comes more from how your credit looks when you actually defaulted on the mortgage. Basically, the better your credit at the time of the default, the bigger the hit your FICO score will take.

My next post will be on Life After a Foreclosure/Short Sale. And how soon you’ll be able to qualify for another mortgage. Please stay tuned. In the meantime, if you have any questions regarding your Ann Arbor Home or need  any Ann Arbor Real Estate Information, please feel free to contact me. Professional Assistance is a click or phone call away.