If you’ve fallen behind on your mortgage, if your home is currently under water, or if you don’t anticipate being able to continue making your home payments, then two options to consider are foreclosure or a short sale. While both can have a negative effect on your credit score, they both act differently. Here’s a closer look at each option and how they can affect your score:

Mortgage’s trial

Foreclosure occurs when you have defaulted on your home loan and the bank claims possession of your home.

The Good: Foreclosure allows you to get away from your home, which is valuable if your current mortgage is higher than the value of your home.

The Bad: Foreclosure takes a heavy toll on your credit score and will stay on a credit report for up to 7 years. It is estimated that a score can be lowered from 100 to 150 points after a foreclosure, but that’s not the worst part. The worst part is, you may not be eligible to buy another home or for a loan for at least 2 to 5 years, depending on the laws in your state.

Dirty shorts

A short sale is an agreement with the bank that you will sell your home for less than you owe in the event that you can no longer make payments as is:

The good: you, and not the bank, control the sale. It’s also a more responsible way to get away from home and qualify to buy another home right away, in some circumstances. However, if you’ve fallen behind on your payments, it may take at least 3 years before you can qualify for an FHA loan.

The bad: Your credit score will still suffer, from 50 to 130 points in some cases. And although the credit bureaus do not appear "dirty shorts" In a report, you can still identify that you settled for less or paid in full for less in a report, which can jeopardize future loan opportunities.

If we were to give you some credit advice, it would be to avoid biting off more than you can chew when it comes to buying a home in the first place, as this reduces the chance of foreclosure and short sale. And unlike other credit repair situations where debt management or financial responsibility can go a long way toward improving your score, foreclosure and short sales can be that red flag on your credit report. over several years, making it very difficult, if not impossible, to get approved for a loan, not to mention good interest rates.