Morality in a graph: Credit scores and mortgages as a lesson in self-control

by Ryan Streeter on June 19, 2012. Follow Ryan on Twitter.

Because we are moral creatures, everything we do has a moral component to it even when it doesn’t seem like it.

That thought popped into my head as I saw this graph atop the Wall Street Journal’s web site today:

We think of credit scores and mortgages as financial concepts in the housing market. But they are more than that. They teach a moral lesson.

Back in 2007, whether you had run up the credit cards or used your home’s equity to pay for that trip to St. Barts or buy that 52″ TV you just had to have, financing was the last of your concerns. Fast forward to today. Your company moves you, or you decide you need to be close to your kids’ school. All of a sudden, getting financing becomes your main headache and your principal obstacle to putting your family in the home you think is best for them.

All of us are supposed to learn at an early age that delayed gratification is not only worth it in the end, but good for us along the way. Self-control. Learning to live with less when you can only afford less. Saving money so you have options later. These are fundamental elements of the myth of American bootstrap success.

Back in the boom days, that myth became just that – a myth. Those things no longer mattered.

Or so we thought. Now, as the graph above shows, they still matter. Those who lived by them have more options and can take advantage of these ridiculously low interest rates to buy the home that’s right for them. Those who discarded them are now stuck with fewer options and a lot of frustration, not to mention a debt overhang that dashes dreams along the way.

Someone once called the 1990s a vacation from reality. In the housing market, that vacation lasted up through 2007. For those who partied like they were on vacation during those years, reality has hit especially hard.