Does a resolved pre-foreclosure look better on your credit report than a completed foreclosure?

Question

Say a borrower sells their house and pays off the note before the trustee auction date. Will this situation impact the borrower's credit report less severely than a foreclosure that goes to auction?

Clearly, option 1 is "better". But the question is, does option one actually look better on your credit report than option 2 does, or do credit reporting agencies not distinguish between a foreclosure that ran its course and one that was settled by the borrower.

Answer 1

If I understand you correctly, you are asking about the following 2 situations.
1. You get behind, but you actually pay the lender what you owe.
2. You get behind and the lender has to take the house.

If that is your question, option 1 looks better to anyone sane.

Answer 2

Without a doubt the foreclosure that goes to auction will hurt more. We have seen people with a 700 credit score go the the high 400's because of a foreclosure.

Here is a recent blog post on our site that deals about credit and foreclosure:
http://www.afscanhelp.com/blog/2007/4/how-does-foreclosure-affect-your.cfm