WASHINGTON (MarketWatch) -- Question: I am in a quandary. I don't know which will damage my credit score more, allowing my lender to foreclose on my house or declaring bankruptcy to buy myself a little more time. So my question is this: Which does more damage to a person's credit score, foreclosure or bankruptcy? And why?

Answer: While certainly a sobering subject, this question is easier to answer than many others about FICO scoring. The FICO scoring formula regards both bankruptcy and foreclosure as serious delinquencies, but it is a bankruptcy that typically lowers a person's score by more points. That's because bankruptcy typically involves more than one account on your credit report, while foreclosure typically involves just one.

"It is this multiple impact that causes bankruptcy to produce a greater impact to the person's score," says Craig Watt, director of public affairs at FICO, formerly Fair Isaac Co.

That's for the immediate damage. The good news is that your score will typically begin to recover from either form of delinquency after a couple of years, as long as there is recent evidence of good credit habits.

"As it ages," Watts says, "the foreclosure or bankruptcy information will gradually have less effect on the person's score until the credit reporting agency removes it from the credit report after seven years (10 years for Chapter 7 bankruptcy)."

Q: Please help. I have used up all my available credit to keep my home and now I have no other source. I have been waiting endlessly on my processor for a response regarding loan modification, but to date, no response. I need help now.

A: I wish I could be of more help, but the only advice I can offer is to be persistent -- and patient. Call your lender once a week if necessary to check on how your request is progressing, making sure that you impress upon the person with whom you speak that you no longer have enough money to make your mortgage payments.

Keep complete and detailed records of your calls, noting time, date and with whom you spoke and your recollection of what was discussed.

Update

New legislation has been tossed into the Congressional hopper with regard to the federal tax credit for first-time buyers.

Here's a rundown from the National Association of Realtors:

• H.R. 2562: Rep. Ron Kind, D-Wis., and three bipartisan co-sponsors have introduced a bill to extend the $8,000 credit through Dec. 1, 2010, but to limit the extension to individuals who served for three months or more in the military during 2009. Currently, the credit is available to first-time buyers who close on their homes by Nov. 31.
• H.R. 2606: Rep. Eddie Bernice Johnson, D-Texas, is offering a measure to expand the credit to all purchasers, not just rookies. The bill also extends the credit through Dec. 31, 2010, and eliminates the repayment feature that applies to the $7,500 first-time buyer credit that was available last year.
• H.R. 2619: Rep. Kenny Marchant's, R-Texas, bill makes the credit available to all purchasers but extends the credit only through June 30, 2010. The bill also calls for a temporary $3,000 tax credit that has the effect of refunding the closing costs associated with refinancing a mortgage, so long as the refinanced amount was no greater than the outstanding balance on the mortgage being refinanced.

Feedback

As a 31-year real estate brokerage veteran, bank investor and commercial developer, I would suggest your thoughts regarding the stimulative effect a tax credit for all buyers is right on target.

The commercial real estate exposure in the in the banking sector is heavily based in unsold subdivision lots and speculative housing starts by home builders. Most of these unsold properties exceed the ability of first-time home buyers. A tax credit for all buyers could be just the jump-start the industry needs to absorb some of the unsold product and could help to clean up the books at the banks.

This would, of course, free additional capital for lending. It could very possibly create the reverse of the credit crisis. As you know...housing led us into recession and will likely be the catalyst that will lead us out. Lee Metzger, Mobile, Ala.