A Short Sale transaction occurs when mortgage lenders allow the borrower to sell the house for less than the amount owed on the mortgage. The foreclosure process occurs when lenders repossess the house, often against an owner’s will.
A Foreclosure, on the other hand, will stay on your credit report for seven years.
The term “short sale” does not appear in a credit report. When you negotiate a short sale, the lender is agreeing to accept less than the full amount owed on the mortgage, and will likely report the account as settled for less than the full balance.
With time, the negative impact on your credit scores will decrease, however will not paralyze you as a foreclosure will, it will be on your credit for 7 years minimum. Additionally, you may have to wait 3 to 4 years before purchasing another home, as with a short sale you will be able to purchase a home as soon as 12 months depending on lender.