Of all the questions I get, this is the most common about mortgage short sales. Richard, will a short sale hurt my credit?

The answer is, probably not much.

A short sale is usually reported as "Paid - Settled" which is what we call an adverse report. We all would like "Paid - Satisfactory."

But "Paid - Settled" is not a chargeoff. It's not a foreclosure. It's not a delinquent or late payment.

In fact, you can often do a mortgage short sale and never make a single late payment. The lender can still approve the short sale and you can get out from under while you have not ever been late.

If you are very concerned with your credit rating on a short sale, this is good news.

There are times when a short sale will hurt your credit, though. Certainly, if you are late with your payments, the lender will often report this. So I see a lot of short sales where the borrower's credit is hurt because of the delinquencies before the short sale.

Also, credit bureaus pick up public records in their reports on you. If a lender files a "notice of default", or NOD, with the county courthouse, that may show up on your credit report as a public record search. This is how bankruptcies and judgments are picked up — through a public record search and nothing to do with what a lender or credit grantor says about you.

There isn't much I can do to remove an accurate honest public record report like a notice of default. But if you do a short sale, you can show your lenders in the future that you settled the obligation and it is not a foreclosure.

Please take a look at can second mortgage lenders sue you after foreclosure.

Also see this article on using an expert to do your short sale.

Also more info on how credit is reported on a short sale.

And make sure you watch my video on short sales and credit. I will never give your name or email away or share it and you can opt out by clicking a link that is on any email I may send you. You will love the video as it answers so many questions. Thanks!