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A notice of default is the notice to signify the beginning of what will likely end up being a foreclosure.
A foreclosure sale means that it has now not only been months later, which further decreases the score, but it is also a more adverse situation as a result of the foreclosure actually occurring where as the notice of default is just stating that it could happen.
A notice of default will be listed under public record the same as a foreclosure.
This will hurt the fico as does the foreclosure but it is no where near as bad as a foreclosure. Foreclosure is the “F” word, in the lending and Real Estate industry, there is nothing that could be worse then this on your record not even a bankruptcy. At this time a short sale and foreclosure are both equally adverse, but there is a movement to make the foreclosure even worse in order to encourage more short sales.
The notice of default will state “ foreclosure proceedings started” on you credit report. By this point the bank/lender has already reported at the minimum three 30-day late payments – which has already lowered your scores. On the flip side, depending on your state foreclosure/judgments laws, by the time the foreclosure sale is final – the lender will have reported three plus 30-day late payments (I have seen twelve to fifteen 30-day late payments reported). It is the late payments that impact your credit score. However, when you are looking to obtain credit after the notice of default or foreclosure sale, lenders are pretty much viewing them the same.
What is the effect on a FICO score of a “Notice of Default” alone vs. a foreclosure sale.