How Does A Short Sale Impact Your Credit Score?

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This is not an April Fools joke but it is based upon a single data point so take it with a grain of salt. I thought this story of how a short sale impacted one person's credit score was extremely interesting and surprising so it was worth sharing.

First, the conventional wisdom is that it takes at least 2 years for your credit score to recover from a short sale. That's a minimum under the best circumstances and the actual record of the short sale remains for 7 years. But a while ago I was talking to someone (a highly reliable source) who had recently gone through a short sale. Having started with a credit score of 720 this person's credit score plunged to a low of 577 within 7 months of stopping their mortgage payments. I think it happened much faster than that but I don't have the precise time frame documented and the actual closing of the short sale did not drop the credit score any further. In other words, the credit score drop was totally driven by the mortgage payment delinquency. BTW, that drop is about what I would expect based upon what I've read on the Internet.

But here is the surprise. Within 5 months of the closing of the short sale this person's credit score had recovered to a 712! That's phenomenal. However, as they say in those TV commercials "individual results may vary". Does anyone have another story to share? It would be great to collect a few more data points.

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