Can a Short Sale Affect Your Credit Scores?

Mortgage and Lending with Guild Mortgage Company


Are you currently late on your mortgage payments? If your answer is yes, then most likely your credit has already been impacted due to the late payments made.

 Call your current lender and ask them how they intend to report your deficiency balance, or if they plan to write off the balance.

If your lender shows the deficiency balance as a collection this will impact your three bureau scores, and unfortunately, there isn't a specific matrix to outline how this will impact your score... that I have found anyway.

 Should your lender write off the balance your credit should not be impacted, however it is not very often that we hear of a lender who does not make attempts to collect on a past due mortgage balance.

If your current lender intends to set up a separate account for the deficiency, such as an installment loan, this should not negatively impact your score unless you make late payments to the new account.

It is also important to ask if the lender if they will report the mortgage account as

"paid in full account"

 For more information regarding how your credit can be impacted you can contact each of the three credit bureaus directly, or contact a credit reporting company who may be able to offer more information.


Heather Burns
Wells Fargo Home Mortgage

206-714-3522 Cell

425- 468-8645 Office


Victoria Murphy
Sotheby's International Realty - Santa Fe, NM
Santa Fe, NM

Heather thank you for the info.  question - I just found out a friend has recieved a foreclosure notice.  she was injured at work and has been on workers comp through three surgeries.  The bank will not speak with her to refi - any suggestions.

Jul 14, 2009 10:38 AM
Dora & Vincent Kwok
HomeSmart Real Estate - Chandler, AZ
CNE - Chandler, Arizona Real Estate

As I understand it, Arizona is a non-deficiency state so the lender can't collect on the deficiency(if the loan was entirely purchase money).  In this case, what does the lender or specifically, Wells Fargo, report to the credit agencies?


Jul 14, 2009 10:46 AM
Matt Listro
National Credit Fixers - Matt Listro - Vernon, CT
Your Credit Repair Expert

Hi Heather: I am going to give your a credit tidbit that few people know.  If you get to 90 days past due on your mortgage it has the same effect as a 120 day late, a 150 day late, or a foreclosure listing.  That's right if it goes from 90 days past due to a foreclosure status it is no worse for your score!


Jul 14, 2009 10:47 AM
Ralph Gorgoglione
Metro Life Homes - Palm Springs, CA
California and Hawaii Real Estate (310) 497-9407

Unfortuantely the credit industry has it's own backward way of reporting that needs to be overhauled MAJORLY!!

Jul 14, 2009 11:06 AM
Heather Burns
Guild Mortgage Company - Kirkland, WA





I totally agree with you!!!


Thank you for the TIDBIT

Dora and Vincent-

Good Question I work in Washington State and I am not familiar with AZ state non-deficiency rule... if your AZ is a non-deficiency state then the balance would be forgiven by the lender (Wells). I believe then the balance (deficiency) may have tax implications. I would advise the customer to talk to an tax specialist.


Do you know if your friend has the means to repay? I am wondering if the lender will not help her due to her not being able to cover the mortgage even if they lower her payment by modification or refinance? I am sorry to hear of her injuries and wish her well.


THank you for all your comments and questions!

Heather Burns

Jul 14, 2009 11:59 AM
John Jones
Briggs Freeman Sotheby's International Realty - Dallas, TX

lots of lenders count short sales as foreclosures nowadays, that's another thing to consider.

Aug 04, 2009 02:02 PM
Heather Burns
Guild Mortgage Company - Kirkland, WA

JOHN, You are absolutley correct! that is why it is imperative if you are considering a short sale you call your lender to ask them how they will report the "short sale" Thank you for your comment.

 Clark, thank you for the infomation

Aug 07, 2009 08:12 AM
Fortunato Campesi
Bergen Couny, NJ Remax Elite Assoc. - Short Sale Specialist - Paramus, NJ
Bergen County Realtor, Bergen County Short Sale Sp

very nice post heather.  Keep up the good work.



Sep 08, 2009 02:20 PM
Heather Burns
Guild Mortgage Company - Kirkland, WA

Thank you Fortunato!

Sep 09, 2009 12:00 PM