One of the questions that is continually posed about short sales is, “How will it affect my credit score?” To start, I’ll highlight the credit score codes that normally are going to show on your credit report. In a short sale, most people have quit paying their mortgage. Around the 60-90 day mark, lenders start reporting the missed payments. Equifax, Transunion and Experian all use the “39” code meaning serious delinquency.
Once the sheriff’s sale happens, some of the lenders are reporting this to the credit report agencies who then add a code “38” which adds a public derogatory record or collection filed to your credit. (In Minnesota, the sheriff’s sale is a public record.)
Below you will find the credit codes and notations used by three main Credit Reporting Agencies. Often called reason codes (or credit score codes or credit scoring codes), they appear on any credit report pulled by a bank or a broker. Normally there is a maximum of 4 codes for each agency. To understand what these credit reason codes mean and how they are used, I would simply consider each reason code is a violation of sorts. Each violation costs you a certain number of points. How many points exactly, no one knows except for a few people who actually wrote the algorithm for each credit scoring brand or model – Beacon, Empirica, and Fair Isaac. These points are deducted from a certain predetermined initial number that may differ for each agency and brand.
When people ask me how much will my credit score drop because of a short sale, the best answer is “It depends”. If you look closely at the reason codes below, you notice that all the reasons can be divided in 5 categories. Each category contributes different approximate percentage or weight into total credit score:
- previous credit performance or payment history – 35%
- current level of indebtedness or a ratio between current balance and credit limit – 30%
- length of credit history or time a given credit line has been in use – 15%
- types of credit available meaning mortgage, installment loan, revolving account – 10% – 15%
- pursuit of new credit meaning a number of recent hard inquiries – 5% – 10%
The bottom line for short sales is that they will probably have a negative effect on your credit score but you can recover more quickly than a foreclosure. Some of my clients have told me their credit score has only gone down 75 points while others have told me their score has gone down 150+ points. This is not a “one size fits all” situation.
Do you want more information about short sales? I can send it to you or meet at your convenience.
Thanks for reading this, Joe Stradcutter.
Joe is a Real Estate Agent at High Point Realty.
Phone: (612) 516-3456. Email info@shortsalemnpro.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it
View My homes for sale at https://tcmnss.myproptrackr.com/pt-properties.php
Joe Stradcutter specializes in short sales in Minneapolis, St. Paul and the surrounding Twin Cities MN area. Minneapolis Short Sales. Minneapolis Short Sale Realtor. Twin Cities Short Sale Realtor. Minneapolis MN Short Sales. Minneapolis Realtor. St. Paul short sales, St. Paul short sale realtor
———————————–
EQUIFAX – BEACON Score Codes
00039 – serious delinquency
00038 – serious delinquency, and derogatory public record or collection filed
00034 – amount owed on delinquent accounts
00033 – proportion of loan balances to loan amounts is too high
00032 – lack of recent information loan information
00030 – time since most recent account opening is too short
00024 – no recent revolving balances
00023 – number of bank or national revolving accounts with balances
00020 – length of time since derogatory public record or collection is too short
00019 – too few accounts currently paid as agreed
00018 – number of accounts with delinquency
00016 – lack of recent revolving account information
00015 – lack of recent bank revolving information
00014 – length of time accounts have been established
00013 – time since delinquency is too recent or unknown
00012 – length of time revolving accounts have been established
00011 – amount owed on revolving account is too high
00010 – proportion of balances to credit limits is too high on bank revolving or other revolving accounts
00009 – too many accounts recently opened
00008 – too many inquiries last 12 months
00006 – too many consumer finance company accounts
00005 – too many accounts with balances
00002 – level of delinquency on accounts
00001 – amount owed on accounts is too high
O – beacon not available, no recently reported account information
FA – number of inquiries adversely affected the score, but not significantly
TRANSUNION – EMPIRICA Score Codes
040 – derogatory public record or collection filed
039 – serious delinquency
038 – serious delinquency, and public record or collection filed
030 – time since most recent account opening is too short
029 – no recent bankcard balances
028 – number of established accounts
027 – too few accounts currently paid as agreed
024 – no recent revolving balances
021 – amount past due on accounts
020 – length of time since derogatory public record or collection is too short
018 – number of accounts with delinquency
017 – no recent non-mortgage balance information
016 – lack of recent revolving account information
015 – lack of recent bank revolving information
014 – length of time accounts have been established
013 – time since delinquency is too recent or unknown
012 – length of time revolving accounts have been established
010 – proportion of balances to credit limits is too high on bank revolving or other revolving accounts
009 – too many accounts recently opened
008 – too many inquiries last 12 months
006 – too many consumer finance company accounts
005 – too many accounts with balances
003 – proportion of loan balances to loan amounts is too high
002 – level of delinquency on accounts
001 – amount owed on accounts too high
- file not scored because subject does not have sufficient credit
FA – in addition to the factors listed above, the number of inquiries on the consumer’s credit file has adversely affected the credit score
EXPERIAN – FAIR ISAAC Score Codes
40 – derogatory public record or collection field
39 – serious delinquency
38 – serious delinquency and public record or collection filed
33 – proportion of current loan balance to original loan amount
32 – no recent installment loan information
24 – lack of recently reported balances on revolving/open accounts
21 – amount past due to accounts
20 – length of time since legal item filed or collection item reported
18 – number of accounts delinquent
16 – insufficient or lack of revolving account information
15 – insufficient or lack of bank revolving account information
14 – length of time accounts have been established
13 – length of time (or unknown time) since account delinquent
12 – length of revolving account history
10 – proportion of balance to high credit on bank revolving or all revolving accounts
09 – number of accounts opened within the last 12 months
08 – number of recent inquiries
06 – number of finance company accounts
05 – number of accounts with balances
02 – delinquency reported on accounts
01 – current balances on accounts
9002 – the profile report does not contain any tradeline which satisfies both of the following: status date within the last six (6) months or a balance within the last six (6) months. does not contain disputed information
- risk score not calculated due to lack of credit history
No comments yet.