If your home is being foreclosed, you understand that your credit report will be adversely affected. And what gives great weight to your credit rating is your credit or FICO score.

A foreclosure can mean a terrible hit on your credit rating because it means that you have been delinquent in making your monthly payments. That has a definite impact on your credit score. One third of your credit score is based on what you owe. And this number is compared to your available credit totals. If you come close to your credit limit or you owe too much, then your score will be lowered.

Another influence to your credit score is how long you have had the account. The ideal situation is to have accounts open for a long period of time and that you have a “healthy” grouping of debts including mortgage, credit cards and an auto loan.

If you find yourself in a situation where you have to do a short sale, you may have late payments on your mortgage as part of your credit record. This affects your credit score and your credit rating.

You can avoid this problem with the help of your lender. You can do a short sale. A short sale is when you sell your property for a lower price than what you owe. But in order to do it, the lender or lenders must agree to it. It is a good alternative because it allows you to preserve decent credit.  In order to do a short sale you need the agreement of the lender. When you make that agreement you can also get him to agree to report to the credit bureau one of three categories about your account — “Paid-Settled,” “Paid-Satisfactory,” or “Unrated.” And you can also do the short sale before you are delinquent with your mortgage payments. This will preserve your good credit. Why are they willing to do this? Because the lender wants to get something back on his or her investment. By selling your home they can be assured of that. If, however, the lender just went on with a foreclosure, then he or she could lose tens of thousands of dollars in expenses for going through the foreclosure, for fixing up the home for re-sale and for marketing and selling the home.

More on what a short sale is and how it can affect your credit can be found in the Mortgage Relief Formula and a video on short sales and credit. Both can be obtained over the internet.

And watch this video on short sales and foreclosures. This is a screen shot — just type in your email and I'll get you to the real video. Thank you.