By Eileen A.J. Connelly, AP Personal Finance Writer
NEW YORK (AP) — Credit cards have moved to the top of the bill pile, displacing mortgages as the priority for many consumers.
"It used to be clearly the case that consumers viewed their mortgage as their No. 1 payment obligation. That is no longer," said Mark Greene, CEO of FICO Inc., the producer of consumer credit scores.
Instead, the data FICO crunches shows that credit cards have taken over. Despite a tough economy, in the past two years payments on credit cards were half as likely to become 90 days past due as they were in 2005. And for borrowers with high credit scores, normally the least risky borrowers, the percentage falling behind on a mortgage is now higher than for credit cards.
There are several reasons for the surprising shift. One is that so many mortgages are underwater — meaning the debt owed on the home is greater than the home's value.
"But we suspect another reason is that credit cards are increasingly important to people," Greene said.
One sign of the role cards now play is how they are used. Last month, for instance, 10% of consumers used their cards to buy groceries. "There's nothing wrong with that, but they then revolved those charges, they didn't pay them off," Greene said. "People are increasingly focused on the use of credit cards as a sort of vital tool for their lives."
An expanded role for credit means a higher profile for FICO. Based in Minneapolis, the company sells its scores to banks and other lenders to help them decide who is a good risk for borrowing money. A decade ago, most consumers were less aware of their credit scores. That's changed today, with the recession driving many to pay closer attention to their personal finances.
FICO has no plans to shift the focus of its business more toward consumers. But it has opened up in recent months, sharing the components that go into a credit score and giving the public better insight into what behaviors can help or hurt a score.