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How long will a foreclosure, short sale, or bankruptcy remain on my credit report?

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What are the guidelines for Fannie Mae, FHA, VA, or USDA Rural loans based on if I foreclose, short sale, or go through bankruptcy?

asked October 7, 2011

4 Answers

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If you foreclose, then here are the guidelines:

  • Fannie Mae: 7 years from Trustee/Foreclosure Sale Date
  • FHA: 3 years from Trustee/Foreclosure Sale Date
  • VA: 2 years from Trustee/Foreclosure Sale Date
  • USDA Rural: 3 years from Trustee/Foreclosure Sale Date

If you short sale, then here are the guidelines:

  • Fannie Mae: 2 years with max 80% LTV, 4 years with max 90% LTV, 7 years with max 100% LTV
  • FHA: 3 years from short sale completion date (may be able to re-nter market if short sale is explained and with no deficiencies
  • VA: 2 years from short sale completion date
  • USDA Rural: 3 years from short sale completion date

If you go through a chapter 7 bankruptcy, then here are the guidelines:

  • Fannie Mae: 4 years from discharge date
  • FHA: 2 years from discharge date
  • VA: 2 years from discharge date
  • USDA Rural: 3 years from discharge date

If you go through a chapter 13 bankruptcy, then here are the guidelines:

  • Fannie Mae: 2 years from discharge date, 4 years from dismissal
  • FHA: 1 year of the payout must elapse, payment performance must be acceptable, needs court approval
  • VA: 1 year of the payout must elapse, payment performance must be acceptable, needs court approval
  • USDA Rural: 1 year from completion
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The question according to the tagline above is “how long do those different scenarios STAY on your credit report”. If that is the question, then the correct answer would be 7-10 years unless you do something proactive to get it removed. That would mean working with a credit repair company. They may or may not be able to help you out.

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It will STAY on your credit report from 7 to ten years. A credit repair company can not get anything removed from your credit that is factually correct. The first answer does correctly address what effect it has on your ability to obtain a new mortgage. Lender rules are changing almost daily…so the effect of a short sale, foreclosure, or bankruptcy may be different a year from now. See a lender to know exactly how it affects you.

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Many people in this situation wonder; ?How does a short sale affect my credit?? You may know by now that a short sale does negatively affect your credit. To be perfectly honest, the better your credit is right now, the worse it will hurt. Not because you are uncreditworthy, but because of the way the credit scoring system is set up.

The part that hurts the most is the 30, 60, 90, 120+ day late payments on your credit report. The short sale itself ? when reported to the credit bureaus ? is stated as: ?settled in full for less than full amount? or some similar jargon. Therefore, these late payments can deduct anywhere between 50 ? 250 points from your score, depending on how high it was when you stopped making payments. As soon as the short sale is complete, it stops any further reporting to the bureaus. Your credit score will begin to recover almost immediately. The higher that your credit score was before you started, the quicker it will go up again.

One problem that homeowners have when it comes to repairing their credit and doing a short sale on their homes is that they are usually late on other bills besides just their mortgage. But a bonus of going through the short sale process is the length of time it takes, in which case some homeowners take the chance to catch up on other bills while they are not paying their mortgage during the short sale process.

By controlling their finances positively, the homeowners can effectively wipe out all of their debt much the same as with a bankruptcy, except without the negative repercussions of a bankruptcy. I will add a section on credit repair at the end of this report to coach you on how to get back on your feet and into a new home sooner through credit repair.

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