We all know how relative credit reports are today. What I mean, is that they not only calk the expected accuracy, by containing errors and out-of date entries. But, what even more damaging, some of the events recorded actually never happened, or their magnitude was totally different than the impact on one's credit score indicates.
Now, the US is undergoing a severe crisis in mortgage loans, with borrowers defaulting across the country, and lenders reporting loses amounting to billiuons of dollars. This in return spawned a huge number of foreclosures, Cleveland seems to be the leader - per capita, where the property is abandoned because its market value is lesser than the amount owed to the financier.
This causes more and more Americans to abandon these homes and "move on". Of course, each case of default on repayments will incurr falling into a bad credit category, and resulting in the entry in the person's credit history file. The question is, if some 3-5 millions of Americans default on their mortgages in a year, will it artificially raise the score of others, whose points were low, but in the above context, become "more valuable?
For example: if Mr Jones have his credit score at 605 (nothing to be proud of); will it suddenly become as good as say, 650 points, because there are so many people now, defaulting and bringing their score down to the low 550?
My guess is, banks will have to adjust their appreciation of the scores. Otherwise, there will be hardly anyone left with the credit score so high, as to warrant doing a business with.
