People who default on mortgages they can afford to pay are savvy about credit and tend to have better credit histories than other defaulters, new research shows.
FICO, the firm that created the widely used FICO credit score, studied credit bureau data to develop what it says is a more accurate portrait of strategic defaulters. FICO defines them as people who are underwater on their mortgage -- owing more than their home is worth -- and more than 90 days delinquent on payments but current on other credit lines.
Compared with other mortgage defaulters, strategic defaulters generally:
-Have higher credit scores. The majority of them have credit scores above 620, FICO's research shows. FICO scores go up to 850.
-Use credit more judiciously. More than 35% of non-strategic defaulters max out their credit cards vs. less than 10% of strategic defaulters.
-Have not been in their home very long.
-Shop for new credit card lines before they strategically default.
"They're getting their life in order," says Andrew Jennings, chief analytics officer at FICO.
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