With the economy rebounding and the average national credit score on the rise, many consumers are coming back from harder times, dusting themselves off and re-entering the mortgage market with a fresh perspective and a cleaner slate. Foreclosures, short sales and bankruptcies remain on a credit report for seven years, which means these items are due to fall off the credit files of 2.5 million consumers between June 2016 and June 2017. Experian's latest analysis shows that 68 percent of these consumers are scoring in the near-prime or higher credit segments. The opportunity for this group to qualify for mortgage loans is growing.

The study takes a closer look at these potential borrowers and explores the consumers who foreclosed or short-sold between 2007 and 2010 and have since opened a new mortgage. 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% of those who short-sold between 2007 and 2010 have opened a new mortgage.

  • Just 1.5% of this short-sale group is delinquent¹ on their mortgage, falling below the national average of 2.8%.

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

  • At 3%, delinquencies on bankcards for this group are lower than the national average of 4.3%. For retail cards, delinquencies are 2.7%, on par with the national average.

• More than 12% of those who foreclosed have now boomeranged (opened new mortgages) and are showing positive signs when it comes to credit management.

  • Just 3% of this group are delinquent on their mortgage.

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

  • Their bankcard delinquency rates are a little higher at 4.1% (just below the national average), yet they have a slightly higher delinquency rate for retail cards at 3.5%.

"With millions of borrowers potentially coming back into the housing market, the trends that we're seeing are promising for both the mortgage seeker and the lender," said Michele Raneri, vice president of analytics and new business development at Experian. "In the coming years, boomerang borrowers will be a critical segment of the real-estate market. While many of these borrowers have gone through a very difficult time, it is encouraging to see them taking control of their finances with better credit scores and all-around better credit management."

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 chart below illustrates these trends:

• The consumers who previously had a foreclosure and have subsequently opened a mortgage (or boomeranged) have an average credit score of 680 (an increase of 20.8% compared with the scores at the time of foreclosure).  

• The consumers who previously had a short sale and have subsequently opened a mortgage (or boomeranged) have an average credit score of 706 (an increase of 16.5% compared with the scores at the time of short sale).  

The study also segmented cities throughout the country by boomerang buyers in both the foreclosure and the short-sale category. Los Angeles, Calif.; Phoenix, Ariz.; and Sacramento, Calif., have the largest number of these buyers.