The words “short sale” do not appear on a consumer’s credit report, according to the Credit Reporting Agencies Bureaus. Instead, lenders generally report short sales as “settled.” Representatives for the Bureaus notes that it would be unusual for a lender to label a mortgage as “paid” after a short sale, given the fact that the homeowner did not honor the original terms of her contract.
Fair Issac Corp. contends that foreclosure alternatives, such as short sales and deeds in lieu of foreclosure, have the a similar impact as a foreclosure. Lenders consider both to be negative information. FICO estimates that a person who starts out with a higher credit score likely will see a bigger drop than somebody with a lower score to begin with. The person with a lower score already has had past credit missteps factored into his score. If a consumer goes into a foreclosure, for example, with a 780 FICO credit score, he can expect to see it drop to between 620 and 640, while somebody who has a 680 FICO score to begin with will see her score fall into a range between 575 and 595.