Archive for April 2011

Fico Score Impact from Short Sale and Foreclosures Finally Answered!!!

April 26, 2011

How much impact does a short sale have on FICO® Scores? How about a foreclosure?  These questions are frequently asked from both borrowers and Realtors.  So I thought I’d asked around, and find some answers to share with you.  Here is some research that Andy Wilson from Royal Team lending discovered when he did his research.

Here is what Andy discovered” about the impact of short sale, foreclosure or bankruptcy on a person’s FICO Score See Andy’s information below.

Impact to FICO® Score

Starting FICO® Score              -680                       -720                       -780

FICO® Score after

these events:

30 days late on mortgage   600-620                640-650                670-690

90 days late on mortgage   600-620                610-630                650-670

Short sale (no deficiency)   610-630                605-625                655-675

Short sale (deficiency)        575-595                570-590                620-640

Foreclosure                             575-595                570-590                620-640

Bankruptcy                              530-550                525-545                540-560

Source:  FICO® Banking Analytics Blog

Estimated time for FICO® Score to fully recover

Starting FICO® Score              -680                       -720                       -780

30 days late on mortgage  -9 months           -2.5 years            -3 years

90 days late on mortgage   -9 months            -3 years               -7 years

Short sale (no deficiency)   -3 years               -7 years               -7 years

Short sale (deficiency)         -3 years               -7 years               -7 years

Foreclosure                              -3 years               -7 years               -7 years

Bankruptcy                               -5 years               7-10 years           7-10 years

Note:  Estimates assume all else held constant over time (eg:  no new account openings, no new delinquency, and similar outstanding debt)

Source:  FICO® Banking Analytics Blog

All in all, you can see:

  • The magnitude of FICO® Score impact is highly dependent on the starting score.
  • There’s no significant difference in score impact between short sale/deed-in-lieu/settlement and foreclosure.
  • While a score may begin to improve sooner, it can take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed.
  • In general, the higher starting score, the longer it takes for the score to fully recover.
  • Even if there’s minimal difference in score impact between moderate and severe delinquencies, there may be significant difference in time required for the score to fully recover.

Andy Wilson Royal Team Lending, Inc
720-299-7559 Direct
Andy@mortgagebrokerandy.com

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