Homeowners are aware that a foreclosure is something they want to avoid at all costs. They know that the result is that they will not only lose their home, but they will suffer damage to their credit.

One way to minimize the damage to your credit is to do a short sale. Short sales are when you sell your house for less than it is worth. The purpose is to minimize damage to your credit. If the lender agrees to a short sale, then once it is completed, he or she notifies the credit organizations that you have “Paid-Settled” or “Paid-Satisfactory” and your credit stays relatively intact. And there is another rating that most people may not be aware of. It’s called “Unrated.” It is said that “Unrated” is even better than “Paid-Settled” or “Paid-Satisfactory.” Whatever rating your lender agrees to report, it is so much better than a foreclosure or bankruptcy.

But, as in just about everything, there is a caveat. There are times when a short sale can hurt your credit. If, for example, you are late making payments to your mortgage prior to the short sale, then the lender will probably report it. In addition, credit bureaus garner information from public records. If a lender files a “notice of default” (NOD) with the county court, then that may appear on your credit report. Once something is public record, there’s very little if anything you can do about it. But if you do a short sale, you can prove to future lenders that your house was not foreclosed and that you had settled satisfactory with the previous lender.

So, yes, you do take a hit if the lender reports problems. But you have a way to provide an explanation and the result may be that the hit won’t be all that bad.

Even this can be avoided if you get your lender to agree not only to the short sale itself but for him to provide the credit organizations that “Paid-Satisfactory” or “Paid-Settled” or “Unrated” report.

You can find out more about saving your credit from the Mortgage Relief Formula which is available over the internet. Knowledge is a powerful thing. You should know the advantages and disadvantages on your credit of doing a short sale before one is done.

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.