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