In the aftermath of the financial crisis, an overwhelming number of Americans have felt the repercussions of having the mark of foreclosure, short-sale, or bankruptcy on their credit reports – all of which last for seven years.
However, many of these consumers (roughly 2.5 million) could potentially re-enter the housing market with a clean credit slate much sooner than later, because we are approaching the eighth year since the peak of the crisis.
According to Experian, 68% of these consumers—known as “boomerang borrowers”—are scoring in the near-prime or higher credit segments. The credit giant has found that the VantageScore credit scores of these borrowers have climbed significantly since their foreclosures or short-sales, and have even surpassed the scores they had prior to their negative events.
This means that the opportunity for these consumers to qualify for a mortgage loan is starting to grow much stronger.
In a recent report, Experian noted that nearly 29% of those who short-sold between 2007 and 2010 have opened a new mortgage. Of this 29%, only 1.5% have been delinquent on their new mortgage, which is well below the national average of 2.8%. These consumers now have an average credit score of 706, which is a 16.5% increase from the scores seen at the time of their short-sales.
Experian also reported that more than 12% of those who foreclosed between 2007 and 2010 have subsequently opened a new mortgage as well. Most of these borrowers are showing positive signs when it comes to their credit management, and of this 12%, only 3% are currently delinquent on their new mortgage. These consumers now have an average credit score of 680, which is a 20.8% increase from the scores seen at the time of their foreclosures.