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 of people are in the lowest credit score categories
Low mortgage rates and other positive things happening seem to be cancelled out by plunging credit scores. 2.4 more million individuals fell to the lowest credit score categories since the recession began as outlined by some findings by FICO reported by the Associated Press. Historically, just 15 percent of 170 million consumers with active credit accounts, or 25.5 million individuals, fell below 599. Cash loan advances, personal loans, and short term loan 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 probably be more below 599 soon. It was reported by the Associated Press that scores do not go down for numerous months after the first missed payment. The Labor Department says about 26 million people are out of work or underemployed. 150 points could be deleted from a credit score with a foreclosure. Besides a strong short term credit history, years might pass before credit scores are restored again. .
Credit scores don’t get higher with lending standards
Leave it to banks to do their part to lower credit scores. Creditcards.com reports that by cutting credit lines and increasing interest rates, banks are lowering their customers’ credit scores. This happens because FICO scores compare debt levels to credit limits. When you will find 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 could be difficult to pay back debt that is already there. And don’t forget about talking to banks for a personal cash loan.
Is this hard credit making economic recovery more difficult?
The economic downfall was because of consumer spending on an economy that was credit fueled. The economy can’t recover because of all the low credit scores shown in the latest FICO report, according to the Dallas News. The economy isn’t going to grow if people 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. For an economy driven by consumer spending, that can be an amazing feat indeed.
More info accessible 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
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