Unfortunately, it is a pretty bad blemish. A property foreclosure is one of the most damaging events in a borrower's credit record. In terms of the effect on your credit history, a deed in lieu of foreclosure – where you voluntarily “give back” your property to the lender – or a short sale – when the lender agrees to write off a portion of the loan that is higher than the value of the home – is not as adverse as a forced foreclosure.