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Consumers may consider debt management to pay off credit cards, rather than choose between plastic and mortgage loans
By Sam Craine on Feb 24th, 2010
Though it may seem inconceivable to some, a recent report from FICO shows that some consumers are choosing to pay their credit card debt over their mortgage.
According to the firm, from 2008 to 2009 credit cards were only 1.6 times more likely to become 90 days late on payments. However, in 2005 bankcards were three-times as likely to be delinquent when compared to mortgage loans.
"We're identifying lending industry situations in FICO Score Trends that to our knowledge have never been seen before," said FICO CEO Dr. Mark Greene.
The trend of paying off credit card debt over mortgages is even more pronounced when it comes to people with higher credit scores, the FICO report said. Of people with a score ranging from 760 to 789, 0.3 percent went into default on mortgage loans in 2009. However, only 0.1 percent people in that range were in default on their credit card accounts.
Given that a home is a long-term investment that actually has something backing it, it may be advisable for consumers to try and pay their mortgage before their credit cards. Consumers who are having trouble with their credit card debt may consider a debt management plan, which can lead to paying lower interest rates on what people owe on plastic.
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