The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event your credit status can encounter - worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit. While it is up to the individual lender to decide what to report, what often happens is the loan will report as "paid" on their credit report. While that is good news, the bad news is that there will likely be a reference that says "settled for less than originally owed" or something similar. The credit scores will recover faster, with a loan “settled for less than was owed” than it will with a completed foreclosure. It is certainly more advantageous to have the short sale referenced than to have a foreclosure on their credit report. By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly.