They will report something on the lines of “Paid in Full for less than the agreed upon amount.” To future lenders, this will look like a minor hiccup and will really only affect their decision for about 2 years. You'll lose somewhere in the neighborhood of 50 – 100 points on your credit score.

Foreclosure, on the other hand, is not only worse for your credit, but it opens up a huge can of worms. When you agreed to pay back your mortgage, you agreed to pay back the full amount. When your lender sells your home through a trustee sale at auction, they won't get nearly as much as you could get if you sold it before foreclosure (when short sales happen.) Through a short sale, there is usually debt forgiveness of the difference between what you owe and what you sell the home for. You'll still receive an income statement (1099-C) from your lender indicating the difference was treated as an expense to them and income to you, but depending on your current home status, you may be exempt from income tax on that difference.

However, through a foreclosure, the difference that you owe when you sell the home for less than you owe becomes an unsecured debt that the lender will likely pursue you in court to obtain. You will not receive a debt forgiveness, and you will not receive a 1099-C when you default on your loan, and you'll likely spend a fortune defending yourself, and you'll find that you'll lose. Then you'll have a potential judgment, wage garnishment, and bank levy on your hands.

When you're in a position where you're asking whether or not a short sale or foreclosure will hurt your credit more, you might want to shift your thinking, for if this is the position you're in, it's much more important to consider the tax implications and future financial challenges as a result of the entire situation. Credit scores at this point don't mean much at all when thousands of dollars may be on the line.

They will report something on the lines of “Paid in Full for less than the agreed upon amount.” To future lenders, this will look like a minor hiccup and will really only affect their decision for about 2 years. You'll lose somewhere in the neighborhood of 50 – 100 points on your credit score.

Foreclosure, on the other hand, is not only worse for your credit, but it opens up a huge can of worms. When you agreed to pay back your mortgage, you agreed to pay back the full amount. When your lender sells your home through a trustee sale at auction, they won't get nearly as much as you could get if you sold it before foreclosure (when short sales happen.) Through a short sale, there is usually debt forgiveness of the difference between what you owe and what you sell the home for. You'll still receive an income statement (1099-C) from your lender indicating the difference was treated as an expense to them and income to you, but depending on your current home status, you may be exempt from income tax on that difference.

However, through a foreclosure, the difference that you owe when you sell the home for less than you owe becomes an unsecured debt that the lender will likely pursue you in court to obtain. You will not receive a debt forgiveness, and you will not receive a 1099-C when you default on your loan, and you'll likely spend a fortune defending yourself, and you'll find that you'll lose. Then you'll have a potential judgment, wage garnishment, and bank levy on your hands.

When you're in a position where you're asking whether or not a short sale or foreclosure will hurt your credit more, you might want to shift your thinking, for if this is the position you're in, it's much more important to consider the tax implications and future financial challenges as a result of the entire situation. Credit scores at this point don't mean much at all when thousands of dollars may be on the line.

They will report something on the lines of “Paid in Full for less than the agreed upon amount.” To future lenders, this will look like a minor hiccup and will really only affect their decision for about 2 years. You'll lose somewhere in the neighborhood of 50 – 100 points on your credit score.

Foreclosure, on the other hand, is not only worse for your credit, but it opens up a huge can of worms. When you agreed to pay back your mortgage, you agreed to pay back the full amount. When your lender sells your home through a trustee sale at auction, they won't get nearly as much as you could get if you sold it before foreclosure (when short sales happen.) Through a short sale, there is usually debt forgiveness of the difference between what you owe and what you sell the home for. You'll still receive an income statement (1099-C) from your lender indicating the difference was treated as an expense to them and income to you, but depending on your current home status, you may be exempt from income tax on that difference.

However, through a foreclosure, the difference that you owe when you sell the home for less than you owe becomes an unsecured debt that the lender will likely pursue you in court to obtain. You will not receive a debt forgiveness, and you will not receive a 1099-C when you default on your loan, and you'll likely spend a fortune defending yourself, and you'll find that you'll lose. Then you'll have a potential judgment, wage garnishment, and bank levy on your hands.

When you're in a position where you're asking whether or not a short sale or foreclosure will hurt your credit more, you might want to shift your thinking, for if this is the position you're in, it's much more important to consider the tax implications and future financial challenges as a result of the entire situation. Credit scores at this point don't mean much at all when thousands of dollars may be on the line.

They will report something on the lines of “Paid in Full for less than the agreed upon amount.” To future lenders, this will look like a minor hiccup and will really only affect their decision for about 2 years. You'll lose somewhere in the neighborhood of 50 – 100 points on your credit score.

Foreclosure, on the other hand, is not only worse for your credit, but it opens up a huge can of worms. When you agreed to pay back your mortgage, you agreed to pay back the full amount. When your lender sells your home through a trustee sale at auction, they won't get nearly as much as you could get if you sold it before foreclosure (when short sales happen.) Through a short sale, there is usually debt forgiveness of the difference between what you owe and what you sell the home for. You'll still receive an income statement (1099-C) from your lender indicating the difference was treated as an expense to them and income to you, but depending on your current home status, you may be exempt from income tax on that difference.

However, through a foreclosure, the difference that you owe when you sell the home for less than you owe becomes an unsecured debt that the lender will likely pursue you in court to obtain. You will not receive a debt forgiveness, and you will not receive a 1099-C when you default on your loan, and you'll likely spend a fortune defending yourself, and you'll find that you'll lose. Then you'll have a potential judgment, wage garnishment, and bank levy on your hands.

When you're in a position where you're asking whether or not a short sale or foreclosure will hurt your credit more, you might want to shift your thinking, for if this is the position you're in, it's much more important to consider the tax implications and future financial challenges as a result of the entire situation. Credit scores at this point don't mean much at all when thousands of dollars may be on the line.