Lower credit scores and tighter lending standards become the norm

Millions of Americans are seeing credit scores fall to new lows. Tighter lending standards and lower credit scores have economic recovery having a hard time finding its way back. Figures provided by FICO Inc. show that 25.5 percent of consumers — about 43 million individuals — now have a credit score of 599 or below. These consumers probably won’t be able to get the affordable mortgages, auto loan for bad credit and credit cards that economic recovery is depending on.

Lowest credit score category has millions in it

Along with a high unemployment rate and depressed home prices, plunging credit scores seem to be canceling out what should be optimistic things like record low mortgage rates and no-interest automotive loans. The Associated Press reports that FICO’s findings show an additional 2.4 million individuals fell into the lowest credit score categories during the Great Recession. Below a 599 score there used to only be 15 percent of 170 million consumers, 25.5 million people. Borrowing for these consumers is often limited to short term credit alternatives like installment loans for bad credit, personal loan and cash til payday advances.

Low credit scores need to be fixed with a lifeline

Soon there should be more under the 599 score despite the fact that it is already lower than it has ever been. It was reported by the Associated Press that scores don’t go down for numerous months following the first missed payment. 26 million people, according to the Labor Department, are out of work or underemployed. Just a simple foreclosure of a home takes your score down 150 points. Once the damage is done, it might be years before this group can restore their credit scores, even with a strong short-term credit history. These people can be saved, luckily, by these short term credit alternatives.

Credit scores are lowered by lending standards

Banks help lower credit scores. Creditcards.com reports that by cutting credit lines and increasing interest rates, banks are lowering their customers’ credit scores. FICO tends to compare debt levels to credit limits. When you will find fewer credit lines, it looks like somebody has more debt even when it hasn’t changed at all. Plus, higher interest rates make it tougher to pay off existing debts. And do not forget about talking to banks for a personel loans.

Is the economic recovery ever going to happen with credit so difficult to get?

Consumer spending depending on credit fueled an unsustainable U.S. economic boom that was destined to bust. Considering the latest FICO report on record low credit scores, it’s no wonder a U.S. economic recovery is stuck in neutral, as outlined by the Dallas News. The economy isn’t really going to grow if individuals aren’t able to make the necessary purchases because they can’t get a loan. Americans have to start spending if their credit scores are ever going to improve and if the economy is ever going to get better. For an economy driven by consumer spending, that can be an amazing feat indeed.

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Associated Press
google.com/hostednews/ap/article/ALeqM5g74qg6iCDzFlCHhjsiBGFIHAiJPQD9GTIVU80
Creditcards.com
blogs.creditcards.com/2010/07/fico-credit-scores-fall.php
Dallas News
dallasnews.com/sharedcontent/dws/dn/opinion/editorials/stories/DN-ourcredit_00edi.State.Edition1.6ff689.html