Yea, such a low effort article. I don't mean getting stuff wrong - lots of people do that, but even the writing just felt slap dash to me. One thing I feel like a lot of people misunderstand and conflate IMO is how credit scores work. It's intentional by the industry to be a bit opaque, but because these articles also conflate defaulting on a loan vs defaulting on MFs they imply that both are horrible for your credit. Many people also overrate IMO how bad various credit hits could be. I've seen credit scores vary by 50ish points just "because" as far as I can tell - no holistic difference in debt to income or utilization, but moving stuff around. I've also seen them vary by 20 pts seemingly at random with no active changes made anywhere. The reason I bring this up is that for many things, like buying a car or getting a new credit card, while the news will imply a 50 pt drop will be impactful, it really depends on where that drop or gain is. I haven't noticed (in the situations where I have this knowledge) much correlation on credit line size, credit line interest, approvals in general etc between 730 and 830. This is across car loans, personal loans and credit cards. Much more impactful has been the overall industry rates and prime rate.
On the other side of things, back in college I may have seen people drop into the 630s, and while the terms for things were worse than if you had a 730, it was generally not world ending - you could still get what you needed, perhaps at less top end brands for like car insurance, but practically it wasn't a daily problem. It was also pretty term limited, if you didn't keep defaulting on stuff it started to go away in a few years and went away entirely in 7. Of course you have to take your horizons into account, and most impactful is if you're looking to get a mortgage in the near term - but if you're terminal, or even if you're just set in a job and have a house or apartment already set up, defaulting on one loan is probably going to be of moderate impact except for the phone calls.
For the people who aren't talking about a loan default, and just stopping MFs, well I've seen other debts "go to collections" and again, outside of loans they seem to have very little impact, and the benefit of being in collections is you can make it go away by offering a partial payment - remember the collection agencies bought the debt for pennies on the dollar usually, so say you owed $5k of back MFs, you might well get them to accept $1k and then it's marked as resolved on your credit. And that's IF it ever shows up on the credit report at ALL. Many non loan debts do not end up being reported as we've shown on TUG for MFs. So walking away isn't all that scary really. Especially now that you can basically force all collection efforts to be by mail only.
On top of all that, plenty of people do get by with no credit at all - the unbanked etc - while it's a PITA, it does show IMHO that even if you somehow ended up in the worst situation it's not some death sentence. Like so much it's a bunch of fear to cause people to keep paying for something they cannot use.
So the idea that you're stuck is based on not wanting to stop paying because of fear of a credit report hit because that hit will have "bad outcomes". And I think there's good reason to believe that both the credit report hit and bad outcomes are potentially way less likely (or less relevant in the given example) than the article implies.
www.yahoo.com
