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This is an important point that I think supports the overarching message if this article and the Paulson quote. The system of credit reporting has been setup t

This is an important point that I think supports the overarching message if this article and the Paulson quote. The system of credit reporting has been setup to support this "debt as a moral obligation" assumption. The fear of poor credit scares people into continuing to pay. In reality, a bankruptcy only lasts 7 years on your credit report and most banks will start lending after merely 2-3 years. Underwater homeowners should look at the longer time horizon and see that it will take quite a few years for their assets to be above water. That's several years to re-build their credit with a much lower cost of living.

lionhearted 17y ago
> In reality, a bankruptcy only lasts 7 years on your credit report and most banks will start lending after merely 2-3 years. From my understanding, it goes off your credit score but banks can see past bankruptcies forever and it factors into their decisionmaking on whether to lend and what interest rates and terms to offer. This is what my business banker said to me when I was chatting with him casually - so consider the bias, but he's quite the straightforward and standup guy and we're acquainted a bit outside of the bank. He's not the kind of guy that'd pull my chain (and I didn't have any debt anyways - was just getting a rundown on credit scores). Actually, it was pretty damn illuminating when he told me all of the stuff they have records on - they knew all sorts of information about me that I never gave them.
kls 17y ago
It is 10 years and one can get an auto loan in less than a year if they understand how the mechanisms work. The over-reliance on credit score can be used to a bankruptcy filers advantage if they are careful. A bankruptcy usually take a 60 to 100 point hit on ones credit, not at all devastating. The problem is that most people wait to file after they have missed several payments which, each take a toll, on an individuals credit score. If one files at the first sign of trouble, can hold out making payments until the filing and immediately gets a secured credit card after the fact they can repair the damage in a little as a year. You will pay at least a point hire interest for the 10 years it is on your credit. As well, with so much flight from underwater homes I would not be surprised to see the government enact some form of credit forgiveness once the wreckage is cleared and we are recovering. We have to get all of these consumers back to consuming or our consumer based economy will not survive. Both the corporations and the government are in favor of happy consumers who are pacified by their consumption so they will be extremely interested it lighting that economic "engine" again.

lionhearted 17y ago

> In reality, a bankruptcy only lasts 7 years on your credit report and most banks will start lending after merely 2-3 years. From my understanding, it goes off your credit score but banks can see past bankruptcies forever and it factors into their decisionmaking on whether to lend and what interest rates and terms to offer. This is what my business banker said to me when I was chatting with him casually - so consider the bias, but he's quite the straightforward and standup guy and we're acquainted a bit outside of the bank. He's not the kind of guy that'd pull my chain (and I didn't have any debt anyways - was just getting a rundown on credit scores). Actually, it was pretty damn illuminating when he told me all of the stuff they have records on - they knew all sorts of information about me that I never gave them.

kls 17y ago

It is 10 years and one can get an auto loan in less than a year if they understand how the mechanisms work. The over-reliance on credit score can be used to a bankruptcy filers advantage if they are careful. A bankruptcy usually take a 60 to 100 point hit on ones credit, not at all devastating. The problem is that most people wait to file after they have missed several payments which, each take a toll, on an individuals credit score. If one files at the first sign of trouble, can hold out making payments until the filing and immediately gets a secured credit card after the fact they can repair the damage in a little as a year. You will pay at least a point hire interest for the 10 years it is on your credit. As well, with so much flight from underwater homes I would not be surprised to see the government enact some form of credit forgiveness once the wreckage is cleared and we are recovering. We have to get all of these consumers back to consuming or our consumer based economy will not survive. Both the corporations and the government are in favor of happy consumers who are pacified by their consumption so they will be extremely interested it lighting that economic "engine" again.