One of the great mysteries regarding a consumer’s ability to borrow money is what effect your financial difficulties have on your credit score. Our client’s often ask what effect a short sale, a foreclosure or a bankruptcy will have on their credit scores and their ability to rent a home, buy a car, or purchase another house. Noted financial reporter for the Baltimore Sun, Eileen Ambrose, wrote a very interesting article that was issued in the May 2, 2011 edition. As she stated lenders use credit scores to decide whether to extend credit and under what terms. FICO (Fair Isaac Company) is the most widely used credit scoring agency. FICO scores range from 300 to 850. FICO looked at how long it takes for a credit score to recover for a consumer with a 680, 720 or 780 score. For a 680 score the recovery time for a short sale is 3 years, for a foreclosure 3 years and for a bankruptcy 5 years. FICO found that for consumers with higher scores the recovery time is even longer. For 720 and 780 scores the recovery time for a short sale is 7 years, for a foreclosure 7 years and for a bankruptcy 7-10 years.
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