Now seems like normal to have lower credit scores and tighter lending standards

Many Americans are seeing their credit scores fall drastically. Lower credit scores and tighter lending standards have economic recovery caught between a rock and a hard place. According to FICO Inc. figures, a credit score of 599 or lower is had by 35.5 percent of consumers (43 million). Consumers can’t get auto loan application, credit cards, and also the mortgages that economic recovery is counting on. Source for this article – Lower credit scores and tighter lending standards become the norm by Personal Money Store.

Lowest credit score category has millions in it

plunging credit scores are canceling out good things such as no interest auto loan for bad credit and low mortgage rates. The Associated Press reports that FICO’s findings show an additional 2.4 million people fell into the lowest credit score categories during the Great Recession. Typically only 25.5 million people, or 15 percent of 170 million, fell below a 599 score. Cash today advances, personnel loans, and installment loan are the only short term credit alternatives these consumers have.

A lifeline is needed for many who have low credit scores

Already at record lows, the number of consumers with credit scores below 599 is expected to increase. The Associated Press article indicates that it can take various months before missed payments drive down a credit score. Underemployed or out of work people has hit 26 million as outlined by the Labor Department. Millions more face mortgage foreclosure, which can delete 150 points from a credit score. Besides a strong short term credit history, years might pass before credit scores are restored again. Fortunately, with access to short term credit alternatives, they won’t be totally left out in the cold.

Lending standards keep credit scores low

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. 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 haven’t increased their debt at all. It is harder to pay back debt with higher interest rates. And for a personal loan to help pay the bills, they can forget about talking to their bank.

Is this hard credit making economic recovery more difficult?

The credit fueled economy was bound to fall as that is what consumer spending was based off of. The Dallas News suggests that 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. For credit scores to improve, the economy has to recover and Americans have to change their spending habits. It could 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