Mortgage Defaulters Not Necessarily Credit Risk

Home owners who default on their mortgage but have
no other debts are not credit risks, according to a study released Tuesday from
TransUnion, which analyzed credit patterns of 129,000 consumers over a one-year
period.

Home owners who default only on
their mortgage are less likely to default later on other new loans, such as car
or credit cards, than people who default on mortgages but have at least one
other debt at the same time, TransUnion’s research shows.

What’s more, these mortgage-only defaulters tend to see their
credit scores rebound faster too. For example, mortgage-only defaulters with
Vantage credit scores of 631 to 650 had their scores increase on average by 8
points about a year after defaulting on their mortgage. Yet, defaulters with the
same credit score range but who had more defaults than just a mortgage saw their
credit score drop by 2 points.

Mortgage-only defaulters “are less risky than they appear,” Steve
Chaouki, TransUnion vice president, told USA Today. “Lenders will want to lend
to these people in the future.”

Source:
“Study: Mortgage-only Defaulters May be
Safe Credit Risks,”
USA Today (May 23,
2011)

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