How to Quickly Rebuild Credit Score After Short Sale

A short sale or foreclosure could haunt your credit score for years to come.

A short sale or foreclosure could haunt your credit score for years to come.

If you can't keep up with your mortgage payments, a short sale can get you out from under your obligation. However, your credit score will likely be devastated. If you intend to buy property again in the future, you'll have to build up your score as quickly as possible. Unfortunately, there are no quick fixes for a bad credit score. You can only raise your score significantly by handing your credit responsibly over time.

Stay Current

The biggest component of your credit score is your payment history. A short sale trashes your credit score in part because you've shown that you are either unwilling or unable to pay your debts, which counts against your payment history. Re-establishing a history of consistent and timely payments can be the biggest boost to your score, since payment history is 35 percent of your credit score.

Lower Outstanding Debt

The amount of debt you have counts almost as much as your payment history, at 30 percent of your credit score. Since rebuilding a payment history can take time, cutting down the amount of debt you have after your short sale can be the most rapid way to help raise your score. Your score can also benefit from a reduction in your credit utilization, or the percentage of available credit that you use. Don't close any existing cards, even if paid off, since the length of your credit history contributes another 15 percent to your credit score.

Diversify Credit Profile

Having a mix of credit types can raise your score. In addition to have a few revolving credit accounts, such as your credit cards, 10 percent of your score will benefit from having installment loans. Since you're unlikely to qualify for another home mortgage for at least two years after your short sale, your best bet for an installment loan might be to get a car loan. You could also try to get a personal loan from a local bank or credit union to help your score.

Secured Card

If you're having trouble getting new credit after your short sale, apply for a secured card at your local financial institution. Most secured cards require an upfront deposit equal to the amount of your credit line, but they report to the credit agencies as if they were traditional unsecured cards. After a year or so, many will convert to unsecured cards.

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