TransUnion Study on Mortgage Defaults

TransUnion, one of the three consumer credit reporting agencies, recently conducted a study of consumers who defaulted on only mortgage loans compared to those that defaulted on multiple credit accounts, such as credit cards and car loans. The time frame for their study was from February 2009 to August 2010.  They determined that those who only defaulted on their mortgage (and nothing else) were better credit risks than those who defaulted on multiple accounts.  Mortgage default was defined as 120 days or more past due on the mortgage.  Those that defaulted on their mortgage were current on all other loans or credit cards.

Even though they defaulted on their mortgage, these consumers were able to qualify for a new credit card or loan. A majority got new credit cards; and almost 40% got a car loan, personal line or line of credit.

Those with “mortgage only” delinquency had a lower future delinquency rate than those with multiple delinquencies from both auto loans and credit cards. Their rate was half that of those with multiple delinquencies.

In order to be approved for a loan or credit card, the individual would have to prove they were financial able to pay the debt. A mortgage default of 120 days late or more would have a substantial impact on their credit scores; and would translate into higher interest rates to be paid on any loan or credit card.

It is encouraging that some lenders are willing to give credit to those that have defaulted on their mortgage, car loans are credit cards. Hopefully, these people will continue to be able to pay their debts and keep them current.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

 

Leave a Reply