08.28.07 | Credit card default rates are rising
Per Yahoo! Finance, I was reading how credit card default rates have been increasing. The reason for this, the article discusses, is most likely due to the rise in mortgage rates.
Who is this affecting? Those who have had their mortgage rates increase over the past year or so, as the rates have risen on their adjustable rate mortgages (see below for more info). Because they’ve had trouble paying their mortgage, they’ve established credit card debt and ultimately couldn’t pay the bill, so they had to forfeit their debt, have their house foreclosed, and possibly file for bankruptcy. Following this process can severely knock your credit score to a much lower number.
This is an unfortunate result of those who did not prepare for the eventual increase in mortgage rates. Hopefully, with all the problems that these lenders are having, the next housing boom won’t end with people losing both their homes and credit scores. Thankfully, this isn’t something that affects college students, so feel free to continue your pursuit for a student credit card.
More info on the different mortgage rates: ARM vs. Fixed Rate