A Credit Score Study For Foreclosure Workouts

Information About A Credit Score Study For Foreclosure WorkoutsInformation About A Credit Score Study For Foreclosure Workouts

A lot of people have asked us how a short sale or loan modification impacts a credit score. Recently the credit bureaus conducted an actual study. The study came from a partnership from the three credit bureaus (Equifax, TransUnion, and Experian) and looked at over 400,000 credit files to see the impacts of the various foreclosure workouts.

How Much Does a Loan Modification Impact A Credit Score?

According to the study, homeowners who actually received a permanent loan modification found that those who maintained excellent credit before the modification saw minimal impact to the credit score. Homeowners typically saw a drop of only about a 30 to 40 point drop.

For those whose lender writes down the mortgage balance but chooses not to report the write-down as a charge off, homeowners can actually see a rise in their credit score – about 10 to 30 points.  Crazy as it seems, the rise comes as a result of less total debt so that the debt to income ration (DTI) will not be as high.

The study also found that even in instances where the bank recapitalizes the late payments into the loan, it remains possible that a homeowner could experience a minor score increase as well.

Credit Score Impacts for Short Sales, Foreclosure, and Bankruptcies

The study also zeroed in on short sales, foreclosures and bankruptcies. Keep in mind that these numbers reflect people who maintained excellent credit scores.

For short sales home sellers typically saw a 130 point dip.
People who had their home foreclosed saw approximately a 140 point tumble.
And for those who took the bankruptcy route – they experienced a massive 365 point drop.

So the takeaway here remains try to avoid a BK if at all possible. A bankruptcy affects a credit score so much more that a short sale or even a foreclosure because a short sale or foreclosure affects only one credit account while a BK influences all of them.

With so much confusion about credit score impact, we hope that this info proves useful. We even have a few tricks to help remove negative credit marks that the banks sometimes report to the credit bureaus. Drop us a line and we can explain some ideas.

A Credit Score Study For Foreclosure Workouts

A Credit Score Study For Foreclosure Workouts

A Credit Score Study For Foreclosure Workouts

A Credit Score Study For Foreclosure Workouts

A Credit Score Study For Foreclosure Workouts

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One response to “A Credit Score Study For Foreclosure Workouts

  1. Pingback: The Five Factors Of Credit Scoring | Resource Blog

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