If you are thinking about lending money to someone who defaulted on their mortgage during the past recession, then you can rest fairly easy as long as the mortgage is the only thing they let go, reported TransUnion credit bureau yesterday[1]. In fact, only 11 percent of borrowers with only a mortgage default on their record defaulted on new credit obligations, compared to 27 percent defaulters when it came to having multiple delinquencies. Ezra Becker, TransUnion’s vice president of research and consulting, says that “this recession was unique in that certain consumers who defaulted on mortgages would otherwise be good credit risks.” He believes that people who defaulted only on their mortgages were “driven more by difficult economic circumstances than by any inherent inability to manage debt.”
The study, which analyzed credit patterns of 129,000 consumers over 12 months, indicated that not only are mortgage-only defaulters a better credit risk than people who fell behind on everything, but that these individuals will see a faster credit score rebound as well[2]. Those who defaulted only on a mortgage actually saw an average rebound of eight points, while those with multiple accounts in default saw an average drop of two points. Steve Chaouki, another TransUnion vice president, said that the numbers indicate that “lenders will want to lend to these people in the future.”
Do you think that a mortgage default in the past few years should impact your credit score, or should there be some system for accommodating unusual circumstances for people with otherwise good credit?
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[1] http://www.dsnews.com/articles/life-after-foreclosure-study-finds-mortgage-only-defaulters-pose-less-risk-2011-05-24
[2] http://www.ibtimes.com/articles/152084/20110525/mortgage-transunion-credit-scores.htm
