SHORT SALE AND FORECLOSURE HAVE SAME IMPACT ON FICO ENTER STRATEGIC DEFAULTER

I was reading a blog by the Fair Isaac Corp (yes they have a blog) and it talked about the impact of a foreclosure vs. a short sale on a credit report. Come to find out my advice to clients about the credit side of things wasn't entirely correct. Make no mistake a short sale still looks better than a foreclosure, but in the eyes of the credit bureaus? Not so much. Turns out they don't really care if it was a short sale or a foreclosure, your score is going to drop regardless and the magic number is 3. As in 3 years you have to wait until you can buy something again. Come to think about it, if you let a house go in 2008 and you spent the past 3 years paying everything on time and proving on paper that you are fiscally responsible, you could buy this year at rock bottom prices! Heck, you could even buy the same house that you lost close to 40-50% off. Which leads to the STRATEGIC DEFAULTER.

The STRATEGIC DEFAULTER flat out understands the game (it truly is a game). It's like the guy that gets through college doing 120 of the required 120 units to graduate, and if he did 123 units he would probably curse at his degree when it came in the mail and only remember the 1 class that he took by mistake thinking that he had to take it. I won't go on with my opinions on the world's view of college but FICO savvy people understand what's at stake. The government has made it way to easy for someone to walk away from their home with little to no repercussions financially and buy again for a lot less than what you originally owed on a property. Not only is there credit repair places that can get the short sale or foreclosure removed, but I had a guy that bought a new car and a newer, larger home and promptly stopped paying on his original home that was now worth 50% less than what he owed. He simply said, "why would I keep that home?" and though it's sad to admit, ethics and morals aren't playing a very high role in those making the decisions.

It's the world we live in and unless some kind of policy changes or we get an overhaul on individuals values we're going to continue to see these actions and this way of thinking, so everyone prepare and don't be shocked if we see foreclosures continue for quite sometime.