How to Build Your Credit Score Back After Foreclosure or Short Sale?

How to Build Your Credit Score Back Up After Foreclosure or Short Sale?

Credit Score, Foreclosure, Short Sale. Credit Score after Foreclosure or Short Sale. So you’ve foreclosed on a home or had to sell for less than what you owed on the home? You probably think you’re doomed as a consumer moving forward. And while a short sale or foreclosure is never something that you want to have on your credit report, neither is a be-all, end-all when it comes to purchasing power. However, it should go without saying that either a foreclosure or short sale will require consumers to enact some credit repair.


How to Build Your Credit Score After Foreclosure or Short Sale

Credit Score after foreclosure. Just how to you go about rebuilding credit after a short sale or foreclosure? Here’s a closer look:

Rebuilding Credit After Foreclosure/Short Sale

The first thing that you should do after a foreclosure or short sale is put it in the past. Yes, it happened. Yes, it’s unfortunate. Yes, it’s not going to look great on your credit report and it’s going to hurt your credit score. But like we said in the opening, it’s not a be-all, end-all. So put it in the past. It’s over with. While the short sale or foreclosure will stay on your credit report as a negative part of your history, that doesn’t mean that you can’t build positive activity beyond that. The goal for a consumer following a short sale or foreclosure is to build positive activity to make the negative on the credit report look like nothing more than a blip on the radar. Here’s how to do it:

  • Immediately work to start (or continue) at least three positive lines of credit: Whether it’s a secure credit card, personal loan or some other type of account, these lines of credit are all ideal opportunities to build positive activity. Since the FICO score weighs consumer behavior on making on time payments, credit history and credit utilization, you can put the negative of a foreclosure or short sale in the past by building positive activity with at least three accounts. Perhaps you have a healthy account or two opened? Great! Keep up the good work with it.
  • How to build positive credit: Like we hinted at in the last bullet point, the best way to build positive credit is to make on-time payments and keep balances low.

If you follow the two steps above following a foreclosure or short sale, it’s not uncommon to see a significant improvement in your credit score within as little as six months. In fact, it’s not out of the realm of possibility for those with credit scores in the low 500s to see their scores increase into the high 600s or even the 700s after a foreclosure or short sale by building positive activity. Just remember, it’s not a quick fix – it take a little bit of time.

Foreclosure Vs. Short Sale

Foreclosure Vs. Short Sale – News

Foreclosure Vs. Short SaleIf you’ve fallen behind on your mortgage, if your home is currently underwater or if you don’t foresee being able to continue making payments on your home, then two options you may consider are foreclosure or a short sale. While both of these can have a negative effect on your credit score, they both act differently. Here’s a closer look at both options. Foreclosure vs. Short sale is a difficult decision.


Foreclosure occurs when you’ve defaulted on your mortgage loan and the bank reclaims possession of your home.

  • The good: Foreclosure allows you to walk away from your home, which is valuable if your current mortgage is higher than the home’s value.
  • The bad: Foreclosure takes a heavy toll on your credit score and will stay on a credit report for up to 7 years. It’s estimated that a score can be docked from 100 to 150 points after a foreclosure – but that’s not the worst part about it. The worst part is that you may not be eligible to purchase another home or qualify for a loan for at least 2 to 5 years, depending on your state laws.

Short sale

A short sale is an agreement with the bank that you’ll sell your home for less than what you owe on it in the event that you can no longer make payments as-is:

  • The good: You – and not the bank – control the sale. It’s also a more responsible way of walking away from your home and being able to qualify to buy another home immediately, in some circumstances. However, if you’ve fallen behind on payments, it may be at least 3 years before you can qualify for an FHA loan.
  • The bad: Your credit score will still take a hit – from 50 up to 130 points in some cases. And although credit bureaus don’t show “short sale” on a report, it may still identify that you either settled for less or paid in full for less on a report, which can jeopardize future loan opportunities.


If we were to give you a credit tip, it would be to not bite off more than you can chew when it comes to buying a home in the first place, as this reduces the chance of foreclosure and short sale. And unlike other credit repair situations where debt management or financial responsibility can go a long way toward upping your score, foreclosure and short sales can be that warning sign on your credit report for several years, making it very difficult – if not impossible – to get approved for a loan, let alone good interest rates.

For additional information on how to repair your credit, please contact our office at 617-265-7900 or request a free consultation below.