Short sales hurt credit scores more than refinancings

The way homeowners deal with their mortgage problems can have a significant impact on their credit scores, according to VantageScore Solutions, a scoring company created by the national credit bureaus Equifax, Experian and TransUnion. Mortgage modifications that roll penalties into the principal can actually improve borrowers’ scores, the company found. Refinancings of underwater mortgages may have little to no impact on credit scores, no matter how close to delinquency a homeowner was before refinancing. But short sales can lead to significant drops in credit scores, as can a decision to walk away from mortgage debt.