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 optimistic things like no interest auto loan for bad credit and low mortgage rates. 2.4 more million people fell into the lowest credit score categories since the recession started as outlined by 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. Emergency money advances, personal loan, and payday installment loans are the only short term credit alternatives these consumers have.

A lifeline for people with low credit scores

Soon there should be more under the 599 score even though it is already lower than it has ever been. It was reported by the Associated Press that scores don’t go down for many months following the first missed payment. Underemployed or out of work individuals has hit 26 million according to the Labor Department. 150 points could 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, besides a strong short-term credit history. These people could be saved, luckily, by these short term credit alternatives.

Credit scores do not get higher with lending standards

Banks help lower credit scores. It was reported by creditcards.com that banks hurt because they’re increasing interest rates after cutting many credit lines. Credit limits and debt levels are in contrast to FICO. When there are fewer credit lines, it looks like someone has more debt even when it hasn’t changed at all. With all of of the higher interest rates, it can be difficult to pay down debt that is already there. And don’t forget about talking to banks for a personal loans.

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

Consumer spending based on credit fueled an unsustainable U.S. economic boom that was destined to bust. The Dallas News suggests that the FICO report on low credit scores exactly why the economy can’t recover. consumers who can’t borrow money can’t buy houses and cars, invest in home improvements, or make other major purchases that drive economic growth and give businesses reasons to hire workers and ramp up production. If the economy is going to get better, Americans have to spend more, improving their credit scores. For an economy driven by consumer spending, that will be an amazing feat indeed.

More information about this topic at these websites

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