This is an email I received from a friend of mine, Christy Quick. What do you think?
So I’ve been thinking so much about all the bailout programs and how it will probably take so long before the actual implementation will have an impact on the general public. I have given this a lot of thought and I have a suggestion that may help the situation. This may sound incredibly simpleton, but I want to get your thoughts on my idea. Here goes:
So what if mortgage lending institutions stopped reporting to the credit bureaus? Say they could make it retroactive that anyone that’s had a foreclosure in the past 18 months or are currently late on their mortgage payments would not be “dinged” on their credit. Think how many people would miraculously become “credit worthy” again. After all, once it is reported that they have late mortgage payments or worse yet, a posted foreclosure, they are (technical term here) effed royally – and will be for years to come. As a result, their lines of credit are reduced or cut off entirely and their interest rates got hiked higher than Paris Hilton’s mini skirt. There are countless people that stop making credit card payments (even though they have the ability to pay) simply because they know their credit score is already in the toilet. So there’s basically no incentive to keep paying on that credit card (in the short term). It’s certainly a slippery slope … but the fact of the matter is that there are so many people out there that are in good standing with their remaining creditors, but simply because of a foreclosure or pending foreclosure they have all been categorized as being not credit worthy.
As you know, this affects their ability to do almost everything! These people will have to pay higher interest rates when buying a car (if they can secure financing). They will have to pay higher interest rates on credit cards and therefore may be less likely to carry balances on them. And certainly, it affects the most basic of spending habits including buying smaller consumer goods such as TVs, clothing, holiday gifts, etc. What do you think? Do you think it is even reasonable to consider something so basic? As always, Russ, you’re such a good sounding board. All the best and Happy Thanksgiving. ~Christy