EconPapers    
Economics at your fingertips  
 

The impact of missed payments and foreclosures on credit scores

Yuliya Demyanyk ()

The Quarterly Review of Economics and Finance, 2017, vol. 64, issue C, 108-119

Abstract: This paper debunks the common perception that “foreclosure will ruin your credit score.” Using individual-level data from a credit bureau matched with loan-level mortgage data, it is estimated that the very first missed mortgage payment leads to the biggest reduction in credit scores. The effects of subsequent loan impairments are increasingly muted. Post-delinquency foreclosures have only a minimal effect on credit scores. Moreover, credit scores improve substantially a year after borrowers experience 90-day delinquency or foreclosure. The data supports one possible explanation of this improvement: the absence of mortgage payments relaxes the borrowers’ budget constraint, allowing them to restore other forms of credit.

Keywords: Credit score; Foreclosure; Delinquency; Crisis (search for similar items in EconPapers)
JEL-codes: G20 D10 D12 R20 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062976916300618
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Impact of Missed Payments and Foreclosures on Credit Scores (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:64:y:2017:i:c:p:108-119

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-07-22
Handle: RePEc:eee:quaeco:v:64:y:2017:i:c:p:108-119