Many homeowners that are underwater or are looking at the possibility of foreclosure may worry about what will become of their credit score. Uncertainty about how much of a hit one’s credit will take is a frustrating situation, but in a recent report from money.cnn.com, there was some information disclosed about what a short sale or foreclosure will cost, in terms of points on your credit score.
According to the CNN article, situations where a homeowner is 30 to 90 days late may penalize a homeowner by dropping their credit score anywhere from 40-110 points for 30 days or 70-135 points for 90 days.
A bankruptcy will cost 130-240 points, which is to be expected and the foreclosure, short sale, or deed-in-lieu penalties will cost 85-160. However, when it comes to things like short sales many people worry or become irritated over taking a hit on their credit score.
Missed payments, foreclosure, or bankruptcy will obviously take a toll on someone’s credit score, but many homeowners are frustrated in an underwater mortgage situation and feel that taking a loss on their credit score is unfair.
However, many people say that a homeowner is only going to see a lowering of points on their credit score when they miss payments before the short sale process. While a short sale can be problematic for homeowners and there can be troubles that arise, some financial advisors say many homeowners will be better off in the long run by going through the short sale.
Most of the time, a short sale is done when a homeowner simply can’t afford their home loan payment, so getting out of such a situation is going to be necessary to avoid things like missed payments or a foreclosure, which will obviously hurt one’s credit score.
However, the best bet to find out what a short sale will cost a homeowner is for a homeowner to talk to a mortgage lender and discuss the process for selling their underwater mortgage and what any drawbacks may be.