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High Credit Scores Can Sometimes Hurt

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High credit scores may show risks of defaulting. Avoiding credit card debt and having a good rating are very positive things for consumers, but a recent report revealed those with a strong financing history may be at higher risk for strategic defaults on mortgages.

FICO, the top company for credit ratings, recently released a report revealing consumers with great credit are willing to risk defaulting on mortgage payments if they are having trouble with finances.

"As a group, strategic defaulters tend to be more savvy managers of their credit than the general population, with higher FICO Scores, lower revolving balances, fewer instances of exceeding limits on their credit cards and lower retail credit card usage," FICO stated. "This indicates that strategic defaulters display a different type of credit behavior than distressed consumers who miss payments."

Strategic defaulting is a practice that is not recommended, and can severely damage a credit score, by as much as 150 points.

If a consumer has difficulty paying bills on time and is worried about defaulting on any outstanding loans, it is suggested that they contact their lender, as it is possible to lower annual percentage rates and costs. Those with good financial histories have an even stronger chance of receiving improved offers.

Timely articles written by the Editors at DRC

New government regulations in place for consumers in need of debt relief for credit cards and other unsecured debts.