Paying to protect credit score, from underwater(Read article summary)
Should underwater home owners go down with a sinking home to save a credit score?
In an LA Times piece about underwater homeowners stuck in North Las Vegas, reporters Ashley Powers and Alejandro Lazo quote heavy-equipment operator Charles Mills, “We talked about it: What can we do with the house?” Mills said. “Nobody’s going to buy it. Nobody’s going to rent it. If we walk away, my credit’s shot. We’re stuck.”
The unemployed Mills has a job opportunity waiting in Oklahoma but doesn’t think he can leave the house he bought in 2006 for $308,500 that will fetch less than $106,000 today. Mr. Mills has company as 80% of North Las Vegas homeowners owe more on their mortgages than their homes are worth.
“Walking away, it does wreck your credit history for a while and you can’t get another mortgage for seven years,” said Richard Green, director of the USC Lusk Center for Real Estate. Defaulting also makes it harder to rent an apartment. “The other thing is, there is also some sense of obligation to repay your bills,” he said.
But is Mr. Mills right that he should stay strapped to his sinking home to save his sacred credit score?