Millions of Americans are seeing credit scores fall to new lows. Lower credit scores and tighter lending standards have economic recovery caught between a rock and a hard place. 43 million individuals, or 25.5 percent of consumers, have a credit score below 599 as outlined by FICO Inc. .
Categories that are the lowest with credit scores have millions in it
Along with a high unemployment rate and depressed home prices, plunging credit scores appear to be canceling out what should be optimistic things like record low mortgage rates and no-interest auto loans for people with bad credit. 2.4 more million individuals fell to the lowest credit score categories since the recession started according to some findings by FICO reported by the Associated Press. 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 such as payday installment loans, personnel loans and instant loans advances.
A lifeline is needed for those who have low credit scores
Soon there should be more under the 599 score even though it is already lower than it has ever been. The Associated Press article indicates that it can take several months before missed payments drive down a credit score. 26 million people, according to the Labor Department, are out of work or underemployed. Millions more face mortgage foreclosure, which can delete 150 points from a credit score. 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. Fortunately, with access to short term credit alternatives, they won’t be entirely left out in the cold.
Credit scores do not get higher with lending standards
Leave it to banks to do their part to lower credit scores. Banks are hurting credit scores by cutting credit lines and increasing interest rates, as outlined by creditcards.com. FICO tends to compare debt levels to credit limits. Even if they have not increased their debt, it looks like they have when there are less credit lines. Plus, higher interest rates make it tougher to pay back existing debts. And for a personal loan to help pay the bills, they can forget about talking to their bank.
Is easy credit the only way for the economy to recuperate?
The credit fueled economy was bound to fall as that is what consumer spending was depending off of. The Dallas News suggests the FICO report on low credit scores exactly why the economy can’t recover. The economy isn’t going to grow if individuals aren’t able to make the necessary purchases because they cannot get a loan. If the economy is going to get better, Americans have to spend more, improving their credit scores. It will be interesting to see since the economy always has and will continue to be driven by consumer spending.
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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
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