Some American consumers seem to value their credit cards more than their mortgages, at least according to a new study by the credit firm TransUnion. For the past three years, more people were likely to be delinquent on their mortgage and current on their credit card payments than vice versa.
The study found that of adults with at least one credit card and one mortgage, 7.2 percent were at least 30 days late on their mortgage but current on their credit card bills in the fourth quarter of 2010, while 3 percent were paying their mortgages on time but not their credit cards.
This is in contrast to a study done in February by Zogby International, where 79 percent of adults surveyed said that if they could only make one monthly payment, it would be on their mortgage. The TransUnion data may show that actions speak louder than words.
But the news isn’t all bad. The percentage of mortgage-paying credit card non-payers hit a new low. Delinquency numbers fell in the fourth quarter of 2010. The number of credit card-paying mortgage non-payers fell for the first time since the trend emerged in the first quarter of 2008, but it is still 72 percent higher than before the start of the recession, according to a TransUnion statement.
The survey, whose results were released March 29, covered the period between the third quarter of 2006 and the fourth quarter of 2010.
The data came from TransUnion’s quarterly analysis of 27 million records taken from its national database of credit records.
There is a good possibility that people who prefer to pay their credit card debt over their mortgage are driven by a stereotypical believe that paying off credit card debt is the major road to rebuild credit history. Majority of credit experts that give advice on how to repair credit history focus on paying credit card debt more than any other debt. Out of 100 percent of people surveyed by Credit Land.com 89 percent answered that they believe credit cards in the most important factor in credit reconstruction.
Another point in understanding the reason for such results in TransUnion survey is the fact that new government regulations permit renegotiating mortgage payments with banks to lower amounts. A government website MakingHomeAffordable.gov was built by Obama Administration to help homeowners avoid foreclosure. One of the programs introduced through this government website is ability to lower mortgage payments by more than $500 as well as lower interest rates. As a result low income individuals who often rely on credit cards to purchase daily necessities set a priority to pay off credit cards to ensure continues supply of cash. Another incentive is the fact that banks tend to increase credit limits on up to date credit lines and therefore increasing buying power for cash strap consumers.