Selling your home in a short sale will negatively affect your credit score, but how much will depend on many factors. Your payment history, your ability to pay other debts, and the amount the lender forgave in your short sale will all play a part.

A short sale typically will reduce a borrower’s credit score anywhere from 50 to 200 points. In most cases, a short sale will show up as an entry on the borrower’s credit report as “Paid in full; settled for less than originally owed.”

However, damage to your credit score from a short sale is generally less than that from a foreclosure or bankruptcy, which generally are the most damaging financial events which may occur with regards to your score. For this reason, most borrowers consider a short sale to be a better alternative to filing for bankruptcy. Choosing a short sale instead of a foreclosure or bankruptcy is seen as a way to better preserve a borrower’s credit history.

Also, resolving the mortgage problem through a short sale may damage your credit a bit, but it can leave you as a borrower in a much better financial situation, allowing you to improve your credit by keeping up with other debts.

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