Credit Score and Credit Consequences of Short Refi?

Question

Team
I am trying to understand how the Short Refi affects the Credit Score once everything's a done deal. Here's a hypothetical situation. Any insight is Greatly Appreciated!

- I short refi for 'X' amount the Lender sends a 10-99 for the loss they have taken
- I talk to my CPA and have them project the amount as a loss and not a gain in reality
- Lender reports to the Credit Bureau about the Short Refi (which in effect is considered a Short Sale)
- Credit report shows 'Short Sale' or probably, ForeClosure
- Points reduce by about 60 points? (or more)

What happens to:

- My existing Credit Cards. Will the interest rate increase?
- If I plan to lease a vehicle under my LLC and personally agree to be the Guarantor, they are going to have to check my Credit Score. Will the application be denied or higher interest rate for financing?
- What happens to the future credit - i.e. if I apply for a new credit card for my LLC, open a Business Credit line, etc.
-How long does the credit score continue to be low after a Short Refi (7 years? 3 years?, etc.)
- Will I be able to find a rental house after the Short Refi as I am quite certain the Short Refi is going to show up in the Credit Report when the Landlords pull the credit
- Anything else that I have ignored in my questions or scenario

Thanks for your help again Team!

Cheers
Ram

Amanda Herr · Answer

You must Know how to form a proper corporate that had 5 tradelines, pay dex, and must be reported to D&B to maintain a 80 Business Credit.  Business has its own credit score just like your personal credit score.

You must run your business out of home.  Need to have a professional office, website, email, phone no. that matches your business name.

Bank and Dun and Brad do not like home based business.  If you operate your RE Investment business from your home, chances are you will not qualify for a BLOC, you will only qualify for a personal line of credit with your business name.

There is a lot more into it.  Not trying to advertise or selling but PM me.

Thanks,

Aherr

Dave P. · Answer

Ram,

I would recommend doing a lot of homework and finding a reputable credit monitoring agency. I bank with USAA and get credit monitoring for $4/month.

that's the only way i know of having real time knowledge of cause and effect on credit scoring. everything else is myth and theory.

just a thought.

Ram Chandrasekaran · Answer

Thanks much to you both for the response! Took me a while to respond back. Sorry about that. Apparently, the Principal refi is the 'Loan modification' whereas I am doing a Short re-finance which means that the lender is willing to take less than what is owed on the property and I go with a FHA financing. Thats what I meant 'Short' refi and my friend who I am working with informed of a possible Score impact (a definite impact)!

OTOH, what James Williams said is true. I have NOT defaulted neither will I in the future during the process of this Short refi. Fingers crossed!

Please feel free to chip in more comments. Thanks again!

Cheers
Ram

James Williams · Answer

Good info. IN your scenrio which really isn't a short sale per se, will not have any negative affects on your credit unless you missed/late on a payment.

Dave P. · Answer

Ram,

I work in the loss mitigation world daily, but am unfamiliar with the term "short" refi. Are you talking about a principle reduction refi? That is a refi in which the lender reduces the principle amount of the loan as part of the refi.

If so,  a refi does not need to be reported as a short sale, even if the lender reduces the principal portion of the loan. Why not just ask the bank for clarification on their reporting intentions?

It is my understanding, from reading the FICO score reasoning codes, that their is no code for short sale, never mind a code for a "short" refi. The most common code that short sales get lumped into is score reason code 22, which is a serious delinquency. This code applies to mortgage lates that are 120 days or older, foreclosures, and deeds-in-lieu. This code crushes credit scores. However, multiple missed mortgage payments can have a similar affect.

These questions are very hard to definitively answer.