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How will “mass foreclosure” affect credit rankings?

May 20, 2009

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The almighty credit score, the 740 hurdle, the mysterious FICO…..is it going give a wink and a nod to the millions of foreclosure customers coming into the credit market.

Short sales, deeds in lieu of foreclosure, and “proper” foreclosures are affecting Americans all over the country.  While it may not be part of YOUR FICO score it will impact the pool of clients who may want to buy your relocation home in Chicago .

Is “foreclosure” still the scarlet F that it used to be?  I don’t think so, not since people started bragging about bucking the system and declaring bankruptcy.  While it still makes them less of a candidate for the most competitive loan around, they can still get loans nonetheless.    The huge stigma just isn’t there anymore.  So how does that reflect on those of us (gentle reader included, perhaps) who don’t have a foreclosure on their FICO?    We have to admit that a foreclosure five, or seven, years ago carried a much bigger stigma than it does today.  We simply have too many foreclosed properties to throw those owners out “with the bathwater” as it were.

Experts and pundits alike seem to concur – FICO scores will have to be adjusted to take into account the huge amount of bad loans that have flooded our nation.  We simply HAVE to figure out a way to realistically lend to these people if we want them to continue to contribute to the US financial system.

Then again, as they say “a nod is as good as a wink to a blind horse”

 

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