Sunday 17th of January 2021

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More People Pay Credit Card Bills Before Mortgages

Mom and Dad may have taught us to take care of the mortgage first when it’s time to pay the bills. That conventional wisdom is no longer valid in this struggling economy as more credit card companies are getting their money before mortgage lenders do.

A new study by TransUnion, which keeps track of credit histories around the world, reveals the percentage of people who stayed current on their debt while they were late on making mortgage payments increased to 6.6% towards the end of 2009. In the same quarter in 2008 the portion was 4.9 percent.

This trend actually has its roots in the first part of 2008 when the percentage was 4.3 percent. That was up from the 4.0 percent reported in the third quarter of 2007. By the third quarter of 2009 it was 6.3 percent.

This raises a new fear for a U.S. housing market trying to recover from sales that have been down for some time. If more people are late paying off their home loans, that could be the precursor for more Americans who ultimately face foreclosure.

More consumers may be recognizing paying at least the minimum on a card gives them the flexibility to make purchases and keep a somewhat normal life, especially if they are jobless. That’s something to consider when it’s time to make critical purchases such as groceries.

The study was based on 30-day credit card and mortgage delinquency data in the period between 2008’s second and 2009’s third quarter. People surveyed had at least one mortgage and one card.

At the same time as delinquency increased, the proportion of people who were late on paying their credit cards and current on their mortgages dropped to 3.6% in the latter half of 2009. In the beginning of 2008, the percentage had been 4.1%.

The study even measured delinquency among consumers with the lowest credit scores. The delinquency rate for those who were late paying their mortgage but up-to-date on their cards was 29 percent in the third quarter of 2009. That was up from the 19.1 percent reported in the fourth quarter of 2007.

The percentage of the same group who were current on their home payments while late on their cards was 14.5% in the third quarter of 2009. That was down from the 18.1% in the first part of 2008.