What should I do to rebuild my credit after a short sale?
Before you even complete a short sale, your credit score has probably taken a few hits if you've been late on your mortgage. Your score will take another hit of approximately 50-100 points once the sale is completed. Your mortgage will normally be reported on your credit report as "paid in full for less than balance owed" or "settled". You will probably be a renter for a while or maybe even live with some relatives. After a successful short sale, you can normally purchase a home utilizing government financing (FHA and Fannie Mae loans) in about two years. To get back into homeownership though, you need to rebuild your credit.
The easiest and fastest way to rebuild credit is to start with a secured credit card. With a secured card, you put down a deposit equal to your credit line, example $200. The key to your secured card is to use it every month, never charging more than 50% of the credit line, and paying the bill in full each month. For instance, if you have a $200 credit line, DO NOT CHARGE MORE THAN $100. Buy gas for your car, buy some groceries - USE THE CARD but do not go over 50% of the credit line and PAY THE BILL IN FULL EACH MONTH. The credit scoring model gives a significant weight to your use of revolving credit which is credit cards. When you show good fiscal responsibility in the use of your card, you will accrue points quickly and this goes a long way towards re-establishing your credit. You can do a search on the internet for "secured credit cards" and you will find many to choose from. Make sure that you read all of the terms and that you identify all of the fees associated with the card. Some cards are much better than others in terms of fees and interest rates so make sure that you do your homework and find the one that works best for you. THEN USE THE CARD! I know you are very gun-shy in terms of credit after completing your short sale but the only way to win the game is to play the game. You've got to be in it to win it. The sooner you get started on rebuilding your credit, the sooner you will have more options and opportunities in your future financial life.
Along with a good rental history of at least 12-24 months, good use of a secured credit card or two, and time and distance away from your previous mortgage payment history and the short sale, you should see your credit score rebound significantly.
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