The Fair Isaac Corporation (FICO); a public company that, according to Wikipedia, “provides analytics and decision making services--including credit scoring-- intended to help financial services companies make complex, high-volume decisions”; discovered through the evaluation of credit bureau data that those who strategically default on their mortgage are actually quite credit savvy. FICO defines a strategic defaulter as a borrower who is upside down on their mortgage and is more than 90 days late on mortgage payments but still faithfully paying on their other line of credit.
The result of FICO’s evaluation of data revealed that strategic defaulting borrowers are different from other defaulting borrowers in that they typically have higher credit scores, averaging about 620, and are less likely to max out their credit cards where USA Today reports that 35% of non-strategic defaulting borrowers have maxed out their cards.
The most strategic play by these borrowers however is the well calculated shopping of new credit lines before defaulting on current ones.
Given the current state of the housing market the days of strategic defaulting are not going away, but companies like FICO are attempting to help lenders identify those who strategically default on their mortgages in turn slowly fixing a very fragile housing industry.