Pyramid Credit Services

Phone: 480.731.9151
Fax: 480.731.9858

THE SCORE IMPACT OF FORECLOSURE, DEED-IN-LIEU OF FORECLOSURE, OR SHORT SALE

A foreclosure, a deed-in-lieu of foreclosure and a short sale all have a very similar impact on a borrower’s credit score since they all will be reported to the bureaus as a derogatory mark--a severe negative. Depending on the current credit status of the borrower, the score impact could vary greatly for taking any of these actions.

Consider the Current Credit Status of the Borrower
If a recent derogatory already exists on the credit file, it is very possible that there could be little to no score impact when another derogatory is added to the credit profile. For example, if in the last few months an account was listed as in collections on a borrower’s credit profile, a foreclosure, deed-in-lieu of foreclosure or a short sale proceeding could have little or no impact.

In contrast, if a borrower is facing their first and only derogatory from a foreclosure, a deed-in-lieu of foreclosure or a short sale, it will dramatically pull down the score.

Simulate the Score Impact
CreditXpert® What-If Simulator can be used to identify the score impact of any of the three actions. It is important to simulate how each action may affect your borrower.

To simulate a foreclosure or a deed-in-lieu of a foreclosure:
• Uncheck the “Rapid Rescoring Mode” box to simulate the action in planning mode
• Change the “Payment status” to “Paid derogatory”
• Select the Intent (“Payment status is going to become worse (after the credit report date)”) and enter the date

To simulate a short sale:
• Uncheck the “Rapid Rescoring Mode” box to simulate the action in planning mode
• Change the “Payment status” to “Paid derogatory”
• Select the Intent “Payment status was reported incorrectly”
• Add a new account (only if a new loan will be taken to pay off the mortgage)

Note: This simulation is run as though the short sale has already occurred to provide the score impact

Summary
The credit score impact of foreclosure, deed-in-lieu or short sale is based in large part on the borrower’s credit history. However, it is important to note that there are credit-related underwriting criteria other than credit scores that can be impacted by choosing a particular option.

If the borrower selects foreclosure or deed-in-lieu of foreclosure, they could face a very restricted list of mortgage loan programs to choose from in the years following the foreclosure. Many lenders today specifically require that a borrower cannot have any foreclosures in the last 24 to 120 months, with 24 months being the current Fannie Mae standard.

Conversely, by opting for a short sale, a borrower could have more loan programs available to them in a shorter time frame, even when the credit score impact is similar.

SECURITY IS OUR HIGHEST PRIORITY

Proactive security implementation helps prevent unauthorized credit system access

As a broker in the credit world, you may or may not realize that you are increasingly becoming the target of hackers trying to gain access to sensitive consumer information by stealing your credit system login credentials.

What is the cost to you if your login is stolen and used in this way? Equifax, Experian and TransUnion are requiring a year of ID theft insurance to be purchased on each compromised consumer. So a case involving 100 compromised consumers at $200 per consumer equals $20,000 worth of expense that you definitely want to avoid. Per your agreement as an end-user you are responsible for these costs.

Pyramid Credit Services, is taking a proactive approach to security so that you aren’t unknowingly victimized by hackers trying to steal consumer information. In the coming weeks, we will be instituting an “IP Lockdown” feature that will greatly lessen your exposure to this kind of risk. We can activate this with no effort on your part and at no additional cost to you.

This security feature will help to keep the credit information that you order secure even if your login credentials are compromised.

It works by limiting access to your credit system to only pre-approved computers and networks. For example, if you have a work computer and a laptop that you travel with and you regularly place credit orders from both computers, we will lockdown credit system access to the work computer, and the laptop will only be able to place orders when connected to an approved network. This way, if your login credentials are ever compromised and a hacker attempts to use your login on the hacker’s computer, the hacker will not be able to login because that computer is not “IP approved.” Or, if a laptop is stolen, the thief will not be able to login with the laptop because it is not on an approved network.

One potential side effect is that you may not have the all-ranging credit system access you are accustomed to. For example, if you are at a consumer’s home and you want to pull their credit, you will not be able to because the consumer’s home computer is not “IP approved.” We feel that this is an acceptable side effect given the huge losses that you might experience if your login credentials are compromised or your laptop is stolen.

Pyramid Credit Services values your business and we want to help protect you from these breeches as much as we can. Please contact our office should you want to have this security enhancement implemented right away.