Short sales and foreclosures equally degrade FICO scores
Distressed homeowners looking to preserve their credit are unlikely to gain a FICO-score advantage by launching short sales in lieu of foreclosure, according to a recent post on the credit score database's Banking Analytics Blog.
FICO made this conclusion after studying mortgage delinquency data from the nation's three major credit bureaus.
FICO said homeowners with short-sales and foreclosures on their records ended up with similar credit scores, assuming their scores were similar as distressed homeowners (see illustration below).
At one credit bureau, homeowners that entered short-sales found themselves with FICO scores in the 575-to-595 range — the same range reported for parties with foreclosures on their records.
At the remaining two credit bureaus, parties in short-sale and foreclosure faced similar outcomes, with their FICO scores landing in either the 570-to-590 range or the 620-to-640 range, depending on the credit bureau.
Homeowners that offloaded properties through short sale and foreclosure also faced the same three-to-seven year credit restoration period, FICO said.
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