Expert: Regan Shinski - 12/1/2009

Question
QUESTION: we have a question regarding how a short sale or a deed-in-lieu of foreclosure on an out of state propery would effect our credit and how easy is it to repair? at this point our credit score is around 720-750. we recently ran our free credit report but they do not give the actual score. there is score gage that gives an estimate depending on the answers to the questions given. the prpty is NOT our primary home.

ANSWER: There is no definitive answer to this because it depends on so many factors.  Among them how the lender is reporting now, how the lender will report the sale, your current credit status, and other factors.

First of all, most lenders will only agree to a short sale once the borrower has fallen behind on payments.  The late payments alone can do significant damage to a credit score.

Most experts have agreed that a deed-in-lieu has the same affect as a foreclosure and there is no advantage - credit wise - in pursuing this route.  I have read some people with a 720 score dropped to 350 with a foreclosure and bunch of late payments and a short sale dropped them to about 520.  Again, I need to stress that it really depends on how the lender reports it.  A common way is to report it as in redemption status which carries a negative affect on your score.  Some people have gotten extremely lucky and it was either deleted or reported simply as paid.

The issue of credit repair also depends to how it will be reported.  In general, deleting a mortgage through credit repair is harder than average but not as hard as say a tax lien.  It will help credit repair efforts if you keep all documents you receive in the process.  The lender and how it is reported will drive credit repair success but I would not make financial decisions on the assumption that you will be able to get it deleted.

Good luck.  I hope it works out well for you.

Regan

---------- FOLLOW-UP ----------

QUESTION: great thanks, that was alot of info. but than i guess, my next question is, HOW do you go about FIXING the credit report. is it something i can do, or do i have to hire or pay someone to fix the credit report for me. 1 credit report is showing "past due" as status of that prpty. how would we go about fixing that. of course, like most of america, we fell on hard times, and it has ruined our otherwise, near-perfect credit. rather than repair, is it easier to explain to future creditors as to WHY the credit is the way it is? being that we NEVER had a bad credit situation, we have sooooo many questions. let's say we want to purchase/finance or lease or new car? apply for a buss/comm'l loan? apply for a credit card? etc.... what EXACTLY does the poor/low credit score do to those requests? higher interest rates? ( 25%-30%. don't know, we've NEVER paid anything like that.)and how exactly are they going to handle soooooo many people with poor credit due to the recent economy? i'm sure there are more people effected than not. it's not just a few deadbeats, it's probably a good 70% of america is in the same boat.
thanks again  

Answer
Hi Darlene:

in the interest of full disclosure, let me start by saying that I own a credit repair business.  I have done so for many years and have deleted literally thousands of derogatory items off consumers reports.

So, you could hire a professional credit repair company like ours.  Whatever company you choose, make sure they abide by federal law.  All work should be on a written contract, and a written guarantee.  Anyone that promises you 100% success is lying because that is not how credit repair works.

You CAN do this yourself but I must say that it is not everyone's cup of tea.  It takes a HUGE amount of effort and research.  If it is not done properly, not only can you ruin any chances at future repair, you really can do more harm than good.  My first credit repair effort years and years ago literally required a full time commitment.  Nonetheless, people do complete their own repair and I want to be up front that it could be an option for you.

How you go about it is nearly impossible for me to say at this point.  PROPER credit repair requires a real custom approach.  The first step would be to get recent credit reports and make a plan from there.  This can involve dispute letters, validation letters, legal briefings, even court house research.  It really kind of depends exactly what is reporting on each credit report.  The general idea is twofold: Keep hassling the creditor until they don't fight anymore and catch them in a violation of federal or state law.  Once the violation occurs that becomes the basis for the removal of the account and possible offsetting of the debt.

You are correct on your assessment of lower credit scores.  First off, new credit will be very difficult to come by - especially in this tightened credit market.  Credit that you currently have will likely be adjusted to higher interest rates and fees - even if you haven't missed a payment on that account.  They will see missed payments elsewhere and charge you higher rates, lower your limits, even close your accounts.

You are correct that you are not alone in struggling but the credit crunch on people with poor credit continues.  Many think it is responsible for continued economic downturn as people cannot get the favorable credit our economy has depended on for many years.

Anyway, I hope this information helps and drop me an e-mail if you are interested in our services.

Regan
mbscompany@aim.com