Your Credit After a Foreclosure or Short Sale:     The most questions we get from buyers are questions about a person’s credit after a short sales, foreclosure, or bankruptcy as it relates to getting a real estate loan or consumer loan afterward. 

According to Wells Fargo Bank, here is a rule of thumb guideline to help you understand some of the timelines and requirements after an event such as, bankruptcy, foreclosure, or a short sale. 

Conventional Underwriting

After a Short sale

- Extenuating circumstance: 2 years, re-establish good credit, min fico 620

- Financial mismanagement: 4-7 years, re-establish good credit, min fico 680

After a Foreclosure

- Extenuating circumstance: 3 years, re-establish good credit, min fico 620

- Financial mismanagement: 7 years, re-establish good credit, min fico 680

After a Bankruptcy

- Extenuating circumstance: 2 years, re-establish good credit, min fico 620

- Financial mismanagement: 4 years, re-establish good credit, min fico 680

Fha Underwriting

After a Short Sale

2 years

After a Foreclosure

3 years,

After a Bankruptcy

 2 years,

Re-established good credit or chosen not to incur new debt. Exception is granted when less than 2 years but greater than 1 year due to extenuating circumstances – Re-established good credit. Exception is granted when less than 3 years due to extenuating circumstances if borrower was not late on their mortgage payments/ 3 years if they were late on their mortgage payments.

As always, the thing to remember is that no matter how bad things are, and no matter how bad your credit is now, once you change the circumstances you can start anew, rebuild your credit, and in time establish stellar credit by following the following guidelines: 

1)  Keep the amount of your credit balances in total to less than 40% of the total amount of credit you have open.  For example, let’s say that you have a total of $10,000 in available credit between all of your credit cards and lines of credit.  In order to maintain stellar credit you need to keep the amount of balances in total to less than $4,000.

2)  Never allow a payment to go further than (29) days late.  Even if you have already incurred a late charge because you have passed the grace period, go ahead and make the past due payment before the end of the (30) day period.

3)  Avoid having public filings against you.  Sometimes people allow a collection to go to the stage of filing against you on public records just because of a $10.00 dispute.  This can greatly impact your credit score and undue years of hard work in getting your good credit back. 

4)  There are other factors affecting your credit, but if you follow these simple rules you will be surprised how quickly and easily your credit will return to stellar.