>> It is better for yourself and the creditor to just bypass the horrible and at times abusive debt collectors, but this would create a perverse incentive to ALWAYS default on loans.
Doesn't valuing your credit counteract that incentive? You'd only get one shot at this before you lose it. Also, this has long been an option with credit cards.
>Doesn't valuing your credit counteract that incentive?
So what? All poor credit means is that it will be more expensive for me to borrow in the future. If I know I can buy back my debt for pennies on the dollar, who cares how expensive it is for me to borrow?
What this would do is make credit an essentially all or nothing proposition. One screw up and any future car loan, student loan, mortgage or other debt I want is out. I would rather have the opportunity to make up for my mistake by borrowing more expensivly than never being allowed to borrow again.
That is how it works currently. For example, say I have good credit, and it is very easy for me to borrow. My brother has ok credit, and has to borrow more expensively. My parents have terrible credit, and they cannot borrow at all (right now, at some point, their poor credit will fall of their history).
Doesn't valuing your credit counteract that incentive? You'd only get one shot at this before you lose it. Also, this has long been an option with credit cards.