Consumers who have only defaulted on their mortgages are more likely to pay down new credit card debt than those who have a history of delinquency across multiple accounts. This new trend in mortgage-only defaults started after the real estate market crash at the end of 2008. As the subprime mortgage lending market collapsed, many homeowners had the rugged pulled out, leading to defaults.
Those consumers who defaulted on their mortgages in recent years likely did so as a result of the unique problems presented by the housing meltdown, and as a consequence, pose a better credit risk to lenders, according to a new study by the credit monitoring bureau TransUnion. Those with only mortgage defaults allowed new credit card accounts to fall 60 days delinquent 11.4 percent of the time, compared with 27.1 percent of those who have multiple delinquencies in their past.
“This recession was unique in that certain consumers who defaulted on mortgages would otherwise be good credit risks,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “It appears their actions were driven more by difficult economic circumstances than by any inherent inability to manage debt.”
Consumers have repeatedly made efforts to reduce their credit card debt conscientiously during the last year, leading to fewer instances of both delinquency and default for all of the top lenders in the country.