Study Explores Impact of Short Sale, Foreclosure on FICO score

FICO recently released research findings that explore the impact short sales and foreclosures have on FICO scores.

The study simulated various types of mortgage delinquencies on three representative credit bureau profiles of consumers scoring 680, 720, and 780, respectively.  The profiles focused on consumers whose credit characteristics – utilization, delinquency history, age of file – were typical of the three score points considered.  All consumers had an active currently-paid-as-agreed mortgage on file.

Key findings from the study include:

  • The magnitude of FICO® Score impact is highly dependent on the starting score.
  • There’s no significant difference in score impact between short sale/deed-in-lieu/settlement, and foreclosure.
  • While a score may begin to improve sooner, it could take up to 7-10 years to fully recover, assuming all other obligations are paid as agreed.
  • In general, the higher starting score, the longer it takes for the score to fully recover.