"People are told short sales won't hurt their credit," says Maxine Sweet, vice president of public education for credit bureau Experian. "But there is no such thing as a 'short sale' in terms of how the sale is reported to us."

"The way the account is closed out is that it is settled for a lesser amount than you agreed to pay originally," she says. "The status is 'settled.' And it's just as negative as a foreclosure."

One tip: Negotiate so the lender doesn't report the difference between your mortgage and what you repaid as "balance owed" on your credit report, says John Ulzheimer, formerly of FICO, now president of consumer education for SmartCredit.com. Your credit score will take a heavyweight hit, but this action will slightly soften the blow, he says.

Sweet's advice is not to discount the notion of a short sale, just go into it with your eyes open.

"It may be the right decision to get out of the house," she says. It may be "better than a foreclosure in terms of the economy, moving the house and moving on with your life. Just don't expect to walk away with no impact to your credit history."