Everyday one can't pass a TV or newspaper stand without seeing a story on the spiraling economy, home prices, employees losing their jobs. You here it on the radio, standing in line for a coffee and even in restaurants. The latter is what provoked this blog being written.
As I sat enjoying my lunch at a local restaurant here in Santa Rosa, I couldn't help but overhear 3 businessmen at the table behind me expressing their opinions about the economy and what they might do with their stock investments and 401 K's. All three must have been friends for sometime being that they were freely passing information between each other how much they had in their respective 401K's, stock investments and the remaining equity in their homes. Whether each was telling the truth or had inflated what they had accumulated, they each seemed to have done well for themselves. What did strike a nervous cord inside me was when the conversation turned towards the subject of making ones house and credit card payments.
One of the businessman changed the subject to one of his buddies who had a buddy that was one of the few and far between lucky ones who was able to have his loan modified so he could remain in his home.
"Why can't we get it on that!" one exclaimed. "I'd like a lower interest rate. Maybe we should stop paying our mortgages also."
"Yea", said the other man. "Maybe we should stop paying our credit card bills also. What could it hurt, it seems everybody else is getting away with it."
As I paid my bill, I understood their frustration. Although the majority of borrowers who attempt to modify their loans are in dire straights and have exhausted every other possible solution, there are those that work the system to their advantage. However, for any one that pays their mortgage and credit card bills on time and may think about working the system, there are consequences you must be willing to face.
Not only are you committing fraud but the lifetime you have spent building your credit will be wiped away for a number of years. The following are some facts of how long negative information will be attached to your credit report.
Charged Off Accounts: 7 Years
Delinquencies: Up to 7 Years
Child Support Judgments: 7 Years
Bankruptcy: Chapter 13/ 7 Years Chapters 7,11, and 12/10 years
Foreclosure: 7 Years
Collection Accounts: 7 Years, even if paid.
City/County/State/Federal Tax Liens: Unpaid 15 years Paid 7 years
Closed Accounts: Accounts closed to delinquencies remain 7 years. Those closed by the consumer or by the store for lack of use remain 10 years. Be aware that few consumers know that when closing credit card accounts because you don't use them anymore can actually lower your score.
As you can see,although there are some people who might think it worth the risk, working the system can cause some pretty extensive damage to your credit report. Is it worth the risk? I think not, and with lenders tightening up their approval processes even further, why make it any harder on yourself to get a loan down the road. Work the system? I think one will find out the system will work you instead.
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