If I’m Getting Ready for a Short Sale, Do Late Payments Matter?

By Jennifer White

2 min readFeb 16, 2020

Dear Experian,

If I'm planning to do a short sale but have not yet gotten behind on monthly payments, is there any advantage to staying up to date on payments? Would my credit get damaged if I paid late? If it doesn't really matter, then wouldn't it be wiser to just stop payments now and save the money?

- MTS

Dear MTS,

Payment history is the most important factor in calculating credit scores. Allowing your mortgage payments to become delinquent (fall behind) will have an immediate, severe impact on your credit scores.

If you entered a mortgage modification program and had never missed a payment, your scores might not be negatively impacted at all. However, some lenders may require that your mortgage be delinquent before they will enter into a loan modification or a short sale agreement with you.

What Is a Short Sale?

The term "short sale" describes selling your home for less than you owe on the mortgage. The lender is agreeing to a settlement amount for the mortgage, and the mortgage account will usually be reported as "settled for less than full balance." The term "short sale" never appears in a credit report.

Any account reported as settled will damage your credit scores, and a settled mortgage will have an even greater impact than other types of settled debts. On average, a VantageScore^® credit score will drop between 120 and 130 points after a short sale. By comparison, a foreclosure drops a VantageScore credit score on average between 130 and 140 points.

Talk to Your Lender Before Missing Payments

Before going forward with a short sale, speak with your lender about its requirements and how the account will be reported. If your lender states it will not be reported in a negative status, you definitely don't want to miss payments. Late payments will remain on your credit report for up to seven years.

Even if it will be reported negatively as a settled account, continuing to make all the payments on time may help reduce or delay the impact to your credit scores. It also may be viewed more favorably by current and potential lenders reviewing your credit report in the future.

Thanks for asking.
Jennifer White, Consumer Education Specialist