Everyone knows that a foreclosure on your home can have a lasting impact on your credit score. According to the three major credit scoring agencies Equifax, Transunion, and Experian, a foreclosure shows up on a credit report for at least 10 years. Due to the down turn in the housing market, some alternative’s to foreclosure have recently been publicized.

Some home owners that are looking to get out of their homes but owe more than the home is worth are resorting to a short sale. A short sale is an agreement with the bank/lender to specified amount of money to pay off the mortgage. It is always an amount that is less than what is owed on the mortgage. The home owner still needs to find a buyer however the bank takes less money in order to satisfy the debt.

A short sale appears on the credit report as settled debt and depending on the credit agency will remain on a credit report for 7-10 years. So which option is worse for your credit score? A short sale may lower a credit score by 75-125 points whereas a foreclosure may lower a credit score by 200-280 points.