boomerang borrowers rebound from recession

‘Boomerang’ borrowers rebound from recession

Date: June 24, 2020

Millions of consumers who suffered home foreclosures, short sales and bankruptcies at the height of the recession are about to see those negative events drop off their credit reports, and a recent Experian study finds many are re-entering the mortgage market and rebuilding their credit scores.

Foreclosures, short sales and bankruptcies remain on credit reports for seven years, and these items are due to fall off the credit files of 2.5 million consumers between June 2016 and June 2017. Experian’s analysis of those consumers’ VantageScore® 3.0 credit scores found that 68 percent of them are scoring in the near-prime or higher credit segments, a good indication that many are, or soon will be, good candidates for mortgage loans.

The study further examines consumers who went through foreclosures or short sales between 2007 and 2010 and who have since opened new mortgages. These “boomerang borrowers” are showing responsible credit behaviors, have improving credit scores and are current on their debts. The research shows that the people in the short-sale category are rebounding at a higher rate than those who foreclosed, and are making their payments on time. Some highlights:

  • Nearly 29 percent of those who short-sold between 2007 and 2010 have opened new mortgages.

    • Just 1.5 percent of this short-sale group is delinquent on their mortgage (defined for purposes of the study as 60 days or more past due on a payment), a rate that falls below the national average of 2.8 percent.

    • These borrowers are doing well when it comes to making auto loan payments on time. The average for delinquency on auto loans for this group is 1.2 percent, compared with the national average of 2.2 percent.

  • More than 12 percent of those who were foreclosed upon have opened new mortgages and are showing positive signs when it comes to credit management.

    • Just 3 percent of this group are delinquent on their mortgages.

    • They also are just below the national average when it comes to delinquency rates on auto loans, at 1.9 percent.

    • Their bankcard delinquency rates are also just below the national average, at 4.1 percent.

The VantageScore® credit scores of the boomerang buyers have climbed significantly since their foreclosures and short sales, even surpassing the scores they had prior to the negative event. The table below illustrates these trends:

Foreclosure and short-sale population VantageScore® trends

VantageScore 3.0 credit score

Credit score point increase from the time of event to after the event

Before the event**

At time of the event

After the event























**Before-the-event scores were obtained at the end of the last calendar year preceding the foreclosure or short sale
  • Consumers who “boomeranged” by opening new mortgages following foreclosure had an average VantageScore of 680 (an average increase of 117 points compared with the scores at the time of foreclosure).

  • Consumers who “boomeranged” by opening new mortgages following short sales had an average VantageScore of 706 (an average increase of 100 points compared with scores at the time of short sale).