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How Long Does It Take to Rebuild My Credit After a Short Sale?

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We recently received a great question from one of our readers:

In November 2012 I sold my house via a short sale. Except for that, I have never been late on a credit card or any other monthly payment. How long does it take to rebuild my credit and what’s the best way to do it? My score is around 580-640 depending on the credit reporting company. I recently started a job where my income will almost double and plan on paying the only credit card I have off. How can I get my higher income reported to the credit reporting agencies?

As far as your credit scores go, foreclosures and short sales are both equally damaging so realistically, it’s going to take some time to recover and improve your scores.

To put things into perspective, credit scores place more emphasis on the most recent 24 months so with your short sale being so recent, it’s important to keep expectations in check and understand that it’s going to hurt for a while.

The best thing you can do is to continue doing what you’re doing — paying your credit cards and other accounts on time, and paying down your credit card balances — 10% or less of the credit limit will earn you the most points in that category of your score. Other than that, it’s going to take some time — at least 24 months of positive credit patterns – before you’ll begin seeing any significant improvement and even then, it’ll be gradual.

You can pull your credit reports for free once a year from AnnualCreditReport.com, or you can monitor your credit monthly using the free Credit Report Card to track your progress as you rebuild following the short sale.

In regards to your income, trying to report your income to the credit reporting agencies won’t help because income isn’t part of your credit reports. It’s a common misconception that credit reports and credit scores factor in income, but the truth is — they don’t. It doesn’t mean income isn’t important — lenders will consider your income before granting a loan, but as far as your credit reports and credit scores are concerned, income has no bearing on either.

For more on short sales, how they impact your credit and how to recover afterwards, here are four resources that should help:

  1. How Short-Sale Survivors Can Get a Mortgage
  2. Why Are Short Sales So Bad for Your Credit? 
  3. Credit Score Recovery Time From Foreclosures and Short Sales
  4. How Soon Can I Get a Mortgage After Credit Problems?

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