Tighter lending standards become normal along with lower credit scores

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. .

Millions end up within the lowest credit score categories early on

plunging credit scores are canceling out good things like no interest auto loan finance and low mortgage rates. 2.4 more million individuals fell to the lowest credit score categories since the recession started as outlined by some findings by FICO reported by the Associated Press. Generally only 25.5 million individuals, or 15 percent of 170 million, fell below a 599 score. Cash until payday loan advances, personal loan, and installment loans are the only short term credit alternatives these consumers have.

A lifeline is all that is left for those with low credit scores

Even though there are already record lows, there will most likely be more below 599 soon. The Associated Press article indicates that it can take various months before missed payments drive down a credit score. 26 million people, according to the Labor Department, are out of work or underemployed. 150 points can be deleted from a credit score with a foreclosure. Once the damage is done, it could 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.

Banks help lower credit scores. It was reported by creditcards.com that banks hurt because they are increasing interest rates after cutting many credit lines. FICO tends to compare debt levels to credit limits. Lower credit lines make it look like a borrower is closer to being maxed out when they have not increased their debt at all. Plus, higher interest rates make it tougher to pay down existing debts. And don’t forget about talking to banks for a personel loans.

Is the economy going to recovery without credit made easy?

Consumer spending depending on credit fueled an unsustainable U.S. economic boom that was destined to bust. The Dallas News suggests the FICO report on low credit scores exactly why the economy can’t recover. If people aren’t able to help with economic growth by giving businesses reasons to hire workers, then the economy won’t be able to grow. 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 could be an amazing feat indeed.

More details available at these sites

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